Auckland specufestors turn radioactive

By Leith van Onselen

Property investors continue to flood back into Auckland, with the latest data from the Reserve Bank of New Zealand (RBNZ) showing that Auckland investors increased their share of mortgages to 47% in May – the highest level in monthly records dating back to November 2015:

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The share of investors in Auckland is also well up on the rest of New Zealand where investors comprised only 25% of total non-Auckland mortgages.

Worse, the share of investor loans that are interest-only has risen to 55%:

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With Auckland’s median house price nearing $1 million, and clearly in the throws of a speculative bubble, the alarm bells should be ringing loudly within the RBNZ.

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Unconventional Economist
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Comments

  1. In 2007, there was an annoying but smallish correction needed to Auckland property prices – about 20 %. The first ~11% ( and up to that 20% just north of the city) was achieved with a cash rate to 8.25% and floating mortgage rates to 11%. But here’s the thing – no one really noticed! unless you were a seller, because the MSM didn’t utter a peep. Life went on pretty blissfully.
    By 2012 much, if not all, of that correction had evaporated. The 20% was still needed, but had been let slip through the nervous fingers of the RBNZ/Government.
    Today, it’s not the 20% that’s required, it’s the original % + all the appreciation since. Why? Because wages, the fundamental driver of affordability have hardly budged for most of the population in the last 4 years. ‘Affordability’ has only come via lower mortage rates.
    Today, there is no way back. In 2007, there was. In 2012, there was, with difficulty. Today? No way.
    It’s only a matter of how bad the correction will be, when it will happen, and who will be holding the can when it does. Because EVERYONE knows, kicking it further down the road is no longer an option.

    • The only event I can see triggering a change of direction is if bank cost of funds go up and these are passed on to borrowers. But even that seems unlikely at the moment.

  2. reusachtigeMEMBER

    This is why I’m such a big fan of Macroprudential and “lower teh interest rates” combined as it helps boost investor activity over pleb home buyers and increases profits on housing for everyone! More boom times ahead in NZ and AU housing.

    • Yet again, you are the most correct person around, and pretty good looking to boot! I for one am on board and encourage any policy that will result in profits for the sole supporters of our economy, the housing investors. Lets keep this gravy train going!

    • I agree. I am happy to be doing my bit helping mum and dad investors get ahead with my rent and tax payments.

    • As my fine looking bow tied friend would say stop being a looser. Auckland is the worlds best kept secret, always in top 5 of those very unbiased and objective “Most livable city” surveys.

      The world is just starting to wake up to the next great super city. House prices can only go up as this is the new normal.

    • House prices keep going up because money has lost all it’s value. But remember inflation is low, in fact we have deflation, so they say!