Sales volumes catch a winter chill as inflation puts pressure on renters.

Volumes head one way, values the other. 

Despite a mild winter the housing market in terms of sales volume has caught a decent winter chill, with the number of homes sold down 19.6% on last month and 3.8% on the same time last year. This makes it the quietest June since 2015. 

The country may have a small winter chill but Auckland is continuing to suffer from a chronic case of the flu. Sales volumes for the city of sails were down 3.2% and median values remained flat. Using the REINZ HPI (housing price index) measurement which takes into account market composition 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 marketing 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. 

Contributing to the poor numbers is continued difficulty in securing finance for some buyers, this 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 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. 

May numbers just released from Stats NZ added some momentum behind the task of lifting the national housing stock with building consents on the rise again, 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. 

The hard life for renters continues

Renters continue to feel the pressure, with wage increases just barely outstripping inflation by 0.3% annually and median rents hitting $450 up 50% from a decade ago and 7% since June 2018. Wage increases are also concentrated in 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. 

With house price inflation below rental inflation in many parts of the country and interest rates at low first home buyers are continuing to increase their market share which is now running around 24% up from 18% in 2014. 

We are working hard to help those looking to escape rental increases and into the security of their own home and with the loosening of the LVR restrictions and interest rates sitting at historic lows there is plenty of scope to get first home buyers onto the property ladder. So even if you have potential buyers who have had trouble with their bank, we can often help using our diverse panel of lenders to find an option or two for them. 

The Reserve Bank releases summary of submissions into capital review. 

Submissions have closed on the Reserve Banks ‘Capital Review Paper 4: How much capital is enough’, whose recommendations threaten to increase borrowing costs, off the back of attempting to sure up the banking sector against a one in 200 year financial meltdown. 

In the summary of submissions released by the Reserve Bank there appeared to be a general understanding of the intent to sure up the sector but a healthy level of skepticism around if the benefit was worth the potential cost to borrowers and the economy. There was particular concern for agribusiness and small businesses which are the backbone of the New Zealand economy. It was noted by many submitters that the lack of any detailed cost benefit work by the Reserve Bank was of concern and that promises of releasing this work as part of the regulatory impact assessment wasn’t acceptable without a further consultation period on the analysis. 

It’s definitely something to keep a close eye on due to the widespread implications on lending across New Zealand and we will keep you abreast of any updates and their likely impact on your customers.