Sales volumes catch a winter chill and inflation puts pressure on renters

We take a look at the current market conditions and what's putting pressure on renters, while also keeping you up to date with the Reserve Banks capital review and the potential impact on mortgage rates.

Early winter volumes head one way, values the other.

An unseasonably warm start to winter hasn't stopped sales volumes catching a chill. June sales were down 19.6% on last month and 3.8% on the same time last year, making it the quietest June since 2015.

Auckland is continuing to stagnate with sales volumes for the city of sails down 3.2% in June and median values remaining flat. Using the REINZ HPI (housing price index) measurement which adjusts the sales figures to the types of housing being sold, Auckland actually saw a decrease in sales value by 3.5%, indicating a continued cooling in some suburbs.

Feeding into the reduced sales volume was record low listings in some regions, with a national drop off of 7.3% on the same time last year, taking the market down to the lowest level of new listings since records began.

Days to sell also ticked up by three to 41 days but showed big variations nationally with Nelson dropping three to 27 days to sell and the West Coast lifting seven to 67 days.

Some buyers are finding securing a mortgage a bit harder and this has contributed to the poor numbers. This is due to lending criteria being applied more stringently in some areas despite record low interest rates. Movers are also reluctant to sell until they have a place to move to, which can create a downward spiral further impacting listing volumes and sales.

Despite the poor volumes outside of Auckland both the REINZ HPI and median house prices nationally rose in June.

Median house prices were up 4.5% nationally to a record $585,000. Dropping Auckland they rose 5.4%. The HPI saw a 1.7% gain.

The top performing areas were again in the regions as opposed to the big smoke.

Manawatu/Wanganui rocketed up 23.3% to a new record high and both the top and bottom of the South Island recorded strong gains with Tasman clocking 12.4% and Southland a 14.5% increase in median sales price.

Despite low listing volumes, national sales inventory continued it’s four year trek up posting a 4% increase, albeit with some huge regional variation. There was a decrease of nearly 30% on the West Coast to a jump of 16.7% in Northlands housing inventory.

The pace is still on for new builds with Stats NZ numbers released in July showing building consents on the rise again in May, after a drop in April. May saw 3687 new dwellings consented up 13% on April and leading to a year on year increase of 6.3% to 34,672 annually, topping even the heady levels of 2002-2005.

Pain for renters ongoing.

The squealing from renters continues to get louder, and with rents continuing to march up in many areas it's well justified. Wage increases are outstripping inflation by a megar 0.3% annually, while the median rent hit $450 per week as winter struck, up 50% from a decade ago and 7% since June 2018.

To make matters worse wage increases have been experienced mainly by higher and lower income groups, with middle New Zealand being left behind. Combined with recent fuel and food increases those not owning a home are feeling the pinch.

It's not all bad however, with the market providing some opportunities for new buyers. House price inflation is below rental inflation in many parts of the country and interest rates are at record lows. This has seen first home buyers continue to increase their market share to around 24% up from 18% in 2014.

We can help those that are looking to escape rental increases get onto the housing ladder. Loosening of the LVR (Loan to Value) restrictions and interest rates sitting at historic lows meaning there is scope for first home buyers to get away from rising rents and onto the property ladder.

The noise around the Reserve Bank capital review explained.

There has been a lot of noise around the Reserve Bank capital and review it's potential impact on the lending market and wider economy.

Submissions have closed on the review paper, whose purpose was to look at the level of capital that banks need to avoid a one in 200 year financial meltdown.

Submissions showed there was a general agreement around the intent to sure up the banking sector being good but a healthy level of doubt that benefit would be worth the cost to borrowers and the economy.

The most concern was around agribusiness and small business, which are the backbone of the New Zealand economy.

Submitters bemoaned the lack of any detailed cost benefit work by the Reserve Bank and were not impressed with its promise of releasing this work as part of the regulatory impact assessment. Most wanted further consultation period on that analysis.

As a borrower or potential borrower it’s definitely something to keep a close eye on due to the widespread implications it could have on lending across New Zealand. If the recommendations are adopted in full there could be a flow on to interest rates. Don’t fret though we will keep you abreast of any updates and their likely impact on your home loan.