NZ mortgage demand continues to soften

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By Leith van Onselen

The Reserve Bank of New Zealand’s (RBNZ) latest mortgage approval data continues to point to an ongoing weakening of mortgage demand, suggesting that the RBNZ’s speed limits on high loan-to-value ratio (LVR) mortgage lending, introduced on 1 October 2013, are having their desired effect and working to cool the New Zealand housing market.

In the week ended 17 January 2014, the number and value of approvals continued to trend down, as shown clearly by the below charts showing year-on-year growth under the two different RBNZ measures:

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As noted earlier this month, New Zealand home sales have also retraced, providing further evidence that the RBNZ’s mortgage caps are working, since any slowdown in the housing market could be expected to hit sales volumes first before prices:

There is now no doubt about it.

New Zealand’s housing market is slowing.

The number of house sales per month fell 11% over the three months to December, in seasonally adjusted terms – the sharpest decline in house sales since 2009.

Lower turnover is one classic indicator of a market slowdown…

House prices tend to follow sales with a lag of a few months…

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Hopefully, the Reserve Bank of Australia is watching our neighbours across the pond and working behind the scenes with APRA to implement similar macroprudential-style controls on mortgage lending in Australia.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.