New Zealand house prices grew at their slowest pace in five years in September as a hard-fought general election and central bank lending restrictions dampened buying. Quotable Value's (QV) residential property price index rose 4.3 percent in the year to September, the slowest rise since August 2012, after gaining 4.8 percent the previous month.
The Reserve Bank of New Zealand imposed stringent loan-to-value restrictions (LVR) on bank lending last year to reduce risks to the financial system from a red-hot housing market. House prices in the Auckland region, previously the epicentre of house price inflation, grew at just 0.8 percent in the year to September - the slowest pace in six years.
Slow price growth was compounded by an uncertain period around the inconclusive September 23 election, with buyers sidelined as they waited to learn who would form the next government. Neither major party had won enough votes to form a government, leaving the country waiting for populist New Zealand First Party leader Winston Peters to decide whether to support the Labour Party or give the governing National Party a fourth term.
"While there is uncertainty around who will govern the country in the coming weeks, there are policies that if agreed up on under a coalition government could influence the property market," said QV spokesman David Nagel. Centre-left Labour has said it will reduce net migration by almost a third, which would reduce demand for housing, and build 100,000 affordable houses across the country.
Prime Minister and National Party leader Bill English signalled in August that he thought that the central bank should consider removing its LVR curbs. The RBNZ said there was a risk the housing market would take off again if it lifted LVR restrictions. There is also the risk that buying could ramp up in the warmer spring weather or once a government has been formed.