Commentary

Housing market news – is it all just a load of hot air?

August 9 2017  |  3 min read


It seems every second news story is related to housing, from homelessness to regional disparities, the struggles for first home buyers to investors making easy money or how immigration is influencing the market.

For an economist, the trick is not to comment on every new number, but take the time to identify the underlying trends, point out their likely development and consequences and only jump up and down when something new emerges from this analysis.

Last week, we saw datasets issued from the Reserve Bank and the NZ Property Report. These made headlines but there’s not really anything truly new here. The trends are unchanged. But let’s look at what this data has told us so far.

The Reserve Bank data for June shows loan drawdowns, which may apply to dwelling sales made a few months earlier. So this doesn’t give us a truly up to date picture of the housing market. They also have only the barest regional breakdown for Auckland and the rest of New Zealand, so it misses the granularity which is truly important to anyone interested in anything other than potential monetary and macro prudential (LVE etc.) policy.

In June, new mortgage lending of $5bn was 25% less than a year ago, while in May it was down 17% and April 30%. Yes, mortgage business is in retreat, but from a high level and compared with June 2015, the decline is just 12%.

New lending to owner occupiers was down 13% from June last year, but lending to investors was down almost 50%. This is where the hit is occurring and is exactly the effect the Reserve Bank wanted with its 40% LVR investor deposit requirement introduced last year.

The NZ Property Report gathers information from realestate.co.nz which led to headlines about falling listings. They also have data on asking prices, but all this really tells us is what vendors dream of getting for their property.

I prefer to look at the ratio of sales to listings (high = strong market) or, as the NZ Property report does, the number of weeks it would take to sell the current stock of listings, based upon recent months’ sales.

This shows us that it would take 23 weeks to sell everything listed in Auckland – an increase by 10 weeks from a year ago. Yes, the market has slowed a lot, which we already knew, but 23 weeks is right on the 10 year average, so you can’t say the market is weak.

Looking to other parts of New Zealand, it would take 15 weeks in Waikato, compared to the 10 year average of 36 weeks, six weeks in Wellington with an average of 18 weeks, and in Canterbury, 17 with an average of 25. So, while all those areas have dropped compared to the same time last year, they are still selling faster than their 10 year averages.

Key trends

• The LVR restrictions are slowing the Auckland housing market.
• Investors are looking in the regions, causing prices to rise there.
• Watch for over-optimism about Aucklanders moving to the regions and the speed of new housing supply response.
• The housing shortage in Auckland will continue – meaning prices on average will be supported.
• Bargains for first home buyers might be available for a while, as overly-indebted investors decide to cut their losses.


Make yourself at home 

Whether you’re a first home buyer, property investor or you’re just on the move, BNZ will help you find a home loan that suits.

Talk to us about your options.