New Zealand’s housing market is showing further signs of slowing, with the Reserve Bank of New Zealand’s (RBNZ) latest survey of households showing the lowest percentage of people expecting house price gains since 2012. From Interest.co.nz:
…in the past three months the net percentage of people expecting house price gains in the next 12 months has fallen to 58.5% from 67.7% in March.
The new figure – while still showing a high percentage overall expecting rises – is in fact the lowest since September 2012. The peak was 74.3% in March last year, while the lowest point of 34.1 was in June 2011 – the first time that particular question was asked.
Crucially, the median expectation of price rises over the next 12 months has dropped very sharply in the latest quarter to 3.5% from 5% in March. This is also the lowest figure since September 2012.
Meanwhile, RBNZ home loan approvals data also points to softening demand, with the rolling annual number of approvals down 8% from this time last year, with the value of approvals also down 5% (see next chart).
When viewed alongside falling transaction numbers – sales volumes were down 20% in April 2014 from a year earlier – it is becoming clearer that the RBNZ’s macroprudential controls on high risk mortgage lending are working, a viewed shared by the Bank in last week’s Financial Stability Report:
The early evidence suggests that the LVR speed limit is having the expected effect of moderating housing imbalances…
The Reserve Bank’s initial estimates were that LVR restrictions would lower house sales by 3-8 percent, house price inflation by 1-4 percentage points, and housing credit growth by 1-3 percentage points, over the first year that the restrictions are in place…
The Reserve Bank currently judges that LVR restrictions are meeting their objective of mitigating the risks associated with excessive growth in housing-related credit and house prices, with clear evidence of a particularly strong restraining impact on housing market activity in the first six months of implementation…
That said, immigration is rising fast, which should support New Zealand housing going forward (other things equal). From Interest.co.nz:
Statistics New Zealand said that in April the country had a seasonally-adjusted net gain of 4100 migrants. This is the second-highest ever total and follows a March figure (3800), which had also been a second-highest ever.
In the past three months, on a seasonally-adjusted basis, the country has seen a net 11,530 migrants come in.
Such a rate, if continued, would give the country an annual gain of over 46,000, which would easily be the most ever.
All of which highlights the need for the National Government to press on with its supply-side reforms.
