Records tumble as momentum continues to build

Last year finished with a good head of steam building in the housing market with overall median house prices rising nationally. On the other side of the coin, more home buyers have access to easing mortgage serviceability and record low interest rates.

The property market had a strong spring, providing  momentum that has carried into summer, supported by solid employment figures, low interest rates and easing mortgage serviceability tests used by the banks. This easing has allowed more borrowers to access finance, driving mortgage lending activity $550m higher in November compared to a year ago.

Off the back of this, 10 regions hit record median house prices according to the REINZ (Real Estate Institute of NZ). Overall median property prices rose 8.6% nationally in November when compared with the same time in 2018.

The main risk last month was seen to be the Reserve Bank’s (RBNZ) capital announcements, however they were not the sledgehammer blow they had been touted as, with several concessions being made to soften the blow on the banking sector. These included phasing the increased capital requirements in over 7 years instead of 5, and allowing banks more flexibility on the mechanisms they use to meet the requirements. The RBNZ predicts the changes will add 20 basis points to lending rates by the time they are fully implemented. However, there will still continue to be ongoing capital challenges for some of the riskier market segments such as Agribusiness and Property Development, which might create flow on impacts in the wider economy.


Values

As mentioned above, REINZ figures for November show median house prices across New Zealand were up by 8.6% in November to a new high of $630,000 

Auckland despite being a bit flatter than the rest of the country is starting to emerge from a long slumber with an increase in median prices of 2.9% to $885,000. 

Additionally, the Housing Price Index (HPI) hit a record high in 9 regions, and increased nationally by 5.6% on November 2018. Regional NZ continued to lead the HPI increased as well as median house price rises. 

Notable increases year on year (from Nov 2018) 

  • Manawatu/Wanganui up 19% to $400,000
  • Nelson up 16.6% to $610,000
  • Southland up 16.4% to $320,000

Notable decreases year on year (from Nov 2018) 

  • Northland down 1.2% to $499,000
  • Tasman down 3.7% to $602,000


Volumes

Year on year volumes trended down. Low inventory levels (down 19.4% on Nov 2018) and listings (down 9000 on 2018) are continuing to squeeze sales volumes but according to the REINZ, there is also some evidence of a widening gap between vendor expectations and what buyers are willing and able to pay. 

Despite being down 1.9% on November 2018, the 7405 sales were the highest number since May this year, so the month on month trend is actually starting to look up in this regard. 

Looking at the winners and losers volume-wise when compared to November 2018 we see; 

Selling more 

  • Auckland up 8.7% 
  • Waikato up 5.6% 
  • West Coast up 7.5% but on falling values. 

Selling less 

  • Taranaki down 24.8% 
  • Gisbourne down 18.8%
  • Wellington down 12.8% 


Rents

Rents continue their upward trend with the TradeMe rental price index showing a 4.2% increase on November 2018, and Stats NZ annual change in the flow index running at 4.5%. 

Trade Me Property’s Aaron Clancy said the number of properties available to rent was fairly flat compared to last year while demand, on the other hand, was up 17 per cent.

Wellington looks set to overtake Auckland as the most expensive area to rent, with rents up by 10% on last year and showing no signs of slowing. 

Days to sell

These are continuing to track down as one would expect given the stronger market. November’s 33 day number was a day less last month, and was down by 2 days on last year’s figure. 

Where to now?

This momentum should continue into the later months of summer, meaning house prices and rents are likely to keep tracking upwards, but favourable credit conditions should keep first home buyers in the hunt. 

With low returns on bank investments and rising rental prices, investors have been increasing their market share as evidenced by our last few market summaries, and will play a key role in setting the market in 2020. Motivation for them to continue to make advances - despite government rhetoric against them. 

The RBNZ credit review has now played out and everyone knows where they stand. The Government has announced a large borrowing programme and increased spending on infrastructure, which if implemented effectively might hold up what has been a slowing economy. However, backed by liberal monetary policy, the conditions for continued house price growth are there. 

As always, I will continue to keep a finger on the pulse of the current and future economic climate, to keep you up to date with the things that are impacting the lending landscape so you can make better decisions.  If you’d like more information, on anything I’ve covered, please don’t hesitate to get in touch.