“Buyers market” signals sharp New Zealand house price falls

CoreLogic’s Quarterly Property Market & Economic Update notes that the “long-awaited slowdown in NZ’s residential property market has finally arrived” with the “first few months of 2022 genuinely weak”. The slowdown is evidenced by property sales volumes falling to decade lows, driven by “higher mortgage rates and reduced credit availability”.

New Zealand housing sales

Sales go from boom to bust.

CoreLogic also notes that the value of mortgage lending “has now fallen year-on-year for the past six months in a row, with February’s total of $5.7bn down by $1.9bn from the same month a year earlier”, driven by lower lending to investors:

New Zealand mortgage lending

New Zealand mortgage lending has fallen.

CoreLogic states that while new listings “has been pretty typical for the time of year”, total listings have risen on the back of softer buyer demand. This is “giving buyers more choice and seeing some ‘cheeky offers’ being accepted by vendors, some of which are less confident about getting further/higher offers than the first one submitted”.

Accordingly, “the shift to a ‘buyer’s market’” that CoreLogic has been anticipating this year has “moved more quickly than we had expected, and is probably here right now… [which] implies considerably less pressure on prices. Thus, “with buyers now feeling they have the upper hand when it comes to offers, it’s no surprise to see that price pressures have faded away”.

CoreLogic concludes by noting that “for the rest of 2022, it’s likely to be more of the same – higher interest rates, lower sales volumes, and flatter house prices (with outright falls on the cards in some parts of the country)”. However, it still thinks “national average property values could hold roughly steady this year (with falls in some areas offset by rises elsewhere)”.

The final point is where I strongly disagree with CoreLogic. According to its report, mortgage rates are projected to rise by more than 3% from its pandemic low by 2024:

New Zealand mortgage rates

New Zealand mortgage rates are tipped to soar.

If this was to occur, then the average monthly mortgage repayment across New Zealand would soar by around 40% from its pandemic low. This would add around $1300 a month in repayments to the median priced New Zealand dwelling, in turn pushing many Kiwis into severe mortgage stress and shunting house prices sharply lower.

Unconventional Economist

Comments

  1. Goldstandard1MEMBER

    NZ is the canary sitting on the wind turbine for Australia and Canada (and most of the USA). Once it starts, won’t be stopped.

    • On trend housing has been going great guns for the past 25 years as interest rates have structurally declined. Yes there’s negative gearing, population ponzi, land banking and all the rest of it but the price of money is key.

      The cheap money party is already over, housing is just catching up with reality.

  2. Hugh PavletichMEMBER

    New Zealand … The exodus of Kiwi workers …

    … New Zealand’s cost of living and cost of housing have been getting out of hand for a very long time …

    … Now its time to reap the consequences …

    London calling: Inside the fight to halt the exodus of Kiwi workers … Jane Phare … New Zealand Herald
    … behind paywall …

    https://www.nzherald.co.nz/business/the-exodus-what-kiwi-employers-are-doing-to-fight-the-skilled-worker-shortage/5YVSZA3HIB6J4RBD3UFENWES4E/

    Nothing’s going to stop thousands of cooped-up young Kiwis from heading off now the borders are open but their departure can only exacerbate critical shortages of skilled workers. In the first of a five-part series, Jane Phare looks at what employers are doing to retain skilled workers, and what part the Government will play in terms of immigration.

    Newly trained occupational therapist Jenelle Thomson doesn’t hesitate when asked why she left New Zealand in February to take up a job in Brisbane.

    “It was the money,” she says. That and the cost of living in New Zealand, and the possibility of buying a house in Queensland much more easily than in Auckland. Thomson, 25, hasn’t looked back since heading across the Ditch. She left behind the prospect of a job as an occupational therapist earning $55,000 a year at Middlemore Hospital after graduating from AUT.

    In Brisbane she started on $76,340 in a private practice. If Thomson transfers to clinical work in a hospital, she is likely to earn more than $100,000. Her Kiwi partner, a civil engineer, is earning $30,000 a year more than his previous job in Auckland. … behind paywall … read more via hyperlink above …

    • Hugh PavletichMEMBER

      … Wops … this 5th para should have been added to the above …

      Their weekly grocery bill is $140 for themselves, and includes cooking two meals a week for two flat mates, compared to more than $200 a week in New Zealand. The couple are saving to buy a house about half an hour out of the city for $545,000.

  3. Hugh PavletichMEMBER

    UPDATE … New Zealand … The exodus of Kiwi workers …

    … How well-off your parents are may determine how likely you are to get ahead in New Zealand, as a generational wealth gap widens. Kate Newton reports.

    A housing crisis that is now in its second decade has lurched into a full-blown generational wealth and wellbeing crisis, data collated by Treasury shows. …

    … When do the dilatory authorities intend to remove the current political planning ban, by freeing up land supply and properly debt financing infrastructure … so the young can buy houses for 3.0 times annual household incomes with sensible mortgage loads of about 2.5 times … as their parents and grandparents did ? …

    … We are talking about simply restoring housing affordability … not inventing it …

    … Why drive young Kiwis out of the country so they can avoid having their lives destroyed with million dollar mortgages ? …

    You might not have heard of ‘dynastic wealth’. It’s hurting a lot of younger Kiwis … Kate Newton … Stuff New Zealand

    https://www.stuff.co.nz/national/explained/128492002/you-might-not-have-heard-of-dynastic-wealth-its-hurting-a-lot-of-younger-kiwis

    Wellbeing in Aotearoa New Zealand … The Treasury New Zealand

    https://www.treasury.govt.nz/sites/default/files/2022-04/sp-wellbeing-aotearoa-new-zealand-12apr22.pdf

    World watching NZ housing market as Auckland labelled ‘canary in coal mine’ … Geraden Cann … Stuff New Zealand

    https://www.stuff.co.nz/business/128396590/world-watching-nz-housing-market-as-auckland-labelled-canary-in-coal-mine

    … Not surprisingly …young Kiwis are fleeing to other countries from million dollar housing mortgage debt slavery …

    Brain drain: Kiwis heading overseas as living costs rise … TVNZ

    https://www.1news.co.nz/2022/04/18/brain-drain-kiwis-heading-overseas-as-living-costs-rise/