Nervous buyers abandon collapsing New Zealand housing market

A collapse in buyer interest has seen the number of homes listed on Realestate.co.nz swell by 77% in May compared with a year earlier:

The chart below shows the number of homes available for sale in all regions at the end of May compared to the end of May last year.

Significantly, new listings across the entire country in May were up only 2.5% compared to May 2021, the second chart below shows new listings by region.

So the increase in stock levels is due almost entirely to a slowdown in sales.

According to the Real Estate Institute of New Zealand, there were 4860 residential properties sold in April this year, down 35% compared to April last year.

New Zealand for sale listings

These results align with the Reserve Bank of New Zealand’s (REINZ) latest mortgage data, which recorded a whopping 30% decline in mortgage commitments in the year to April:

NZ mortgage finance commitments

From boom to bust.

The crash in buyer demand makes sense given the surge in mortgage rates following sharp increases in the official cash rate (OCR) by the RBNZ.

The RBNZ’s ‘forward track’ guidance sees the OCR rising from its current level of 2.0% to 2.7% by September and 3.4% by December, before peaking at 3.9% in June 2023. In turn, the RBNZ forecasts mortgage rates to climb to around 6% – more than double their pre-pandemic level:

Projected New Zealand mortgage rates

Mortgage rates projected to more than double.

New Zealand house prices have already declined by around 5% since November 2021, with the major banks and other forecasters tipping further heavy price falls.

Clearly, New Zealand home buyers are attune to these facts and are weary of catching a falling knife. Who could blame them?

Unconventional Economist

Comments

  1. To give them their due, the RBNZ expected that prices would fall during Covid and not rocket as they did, so they have had the courage to acknowledge their mistake in ‘supporting’ the market, and are setting about correcting it.
    I know property prices are not in their remit, but Financial Stability is. And if there’s one thing that came out of the last unanticipated rise in property prices, it was increased instability.
    There’s a bit to go before we even get back to pre Covid levels.
    After that, there’s an awful lot that needs taking out of prices to get to the financially stable setting the RBNZ will be content with.
    Let’s hope for a gradual decline of, say, 20% per annum for a few years in a row, and not an instantaneous plunge that cripples the innocent.

  2. Hugh PavletichMEMBER

    Getting very messy … very fast …

    A review of things you need to know before you go home on Thursday; more retail rate rises, Barfoots reports downturn, building costs leap, car imports up, retail tough, swaps up, NZD down, & more … David Chaston … Interest Co NZ

    https://www.interest.co.nz/business/116201/review-things-you-need-know-you-go-home-thursday-more-retail-rate-rises-barfoots

    The highest auction sales rates were recorded in Rodney and Waikato last week … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116157/highest-auction-sales-rates-were-recorded-rodney-and-waikato-last-week

    • Hugh PavletichMEMBER

      Check out recent MB post …

      https://www.macrobusiness.com.au/2022/06/bearish-banks-forecast-deeper-new-zealand-house-price-bust/#comment-4281200

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      … Windbag politicians, public servants and professionals are rarely … if ever … held to account …

      … Allowing affordable low density low and light construction on sound ground is essential …

      Pretty vacant: What’s wrong with Wellington’s buildings and are any safe? … Georgina Campbell … New Zealand Herald
      … behind paywall …

      Alpine Fault Earthquake series: Landslides, flooding, liquefaction predicted … New Zealand Herald

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      … A Stuff NZ report at time of above documentary release April 2021 …

      ‘Living Hell: Apartment Disasters’ exposes Stonefields block, and calls on MBIE to get involved with wider problem … Colleen Hawkes … Stuff New Zealand