ANZ Economics has released its Business Outlook survey for July, which shows that both business activity and confidence have tanked:
Business activity and confidence have crashed.
The result follows the collapse in both consumer and government confidence to near record lows in June:
New Zealand consumer and government confidence has also collapsed.
The outlook is especially dire for New Zealand’s housing market, with ANZ recording that “residential construction intentions plummeted again to a fresh record low”:
Residential construction intentions point to recession.
ANZ notes that “housing consents are now dropping” and that the “ANZBO data suggests consents may have a lot further to fall yet”. It also explains that “the fall in early 2020 was due to lockdown” but that “it’s difficult to imagine what would lead to such a rapid bounce this time”.
Therefore, construction intentions are pointing to a sharp slowdown in building activity, which will weigh heavily on New Zealand’s economy over coming quarters.
Arguably, the bigger worry for the economy relates to house prices, which have already fallen sharply in response to the Reserve Bank of New Zealand’s (RBNZ) aggressive interest rate hikes.
The REINZ’s latest House Price Index – the preferred measure of the RBNZ – recorded a steep 5.4% decline over the June quarter, with all major urban areas registering quarterly falls. The Trade Me property index similarly posted a record a 1.9% monthly fall in June amid “skyrocketing supply”.
Household consumption is the major driver of New Zealand’s economic growth. Therefore, the sharp lift in mortgage rates, combined with plunging house prices, suggests household consumption will soon fall sharply, presenting further stiff headwinds for the economy.
The RBNZ this month stated that it would continue raising interest rates to fight inflation, which hit a 32-year high 7.3% over the June quarter.
If the RBNZ follows through with its guidance, New Zealand housing will face its biggest ever crash, which also risks throwing the economy into a painful recession.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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Shut.
New Zealand’s shame : In case you have missed this global housing inflation graph on the IMF website …
Global Housing Watch – International Monetary Fund
https://www.imf.org/external/research/housing/
https://www.imf.org/external/research/housing/images/housepricesaroundtheworld_lg.png
You can’t explode a bubble without creating the bubble first. If they had taken small, early pain instead of kicking the can down the road for 10 years, they would not have this disaster brewing now. Ditto all developed economies. It’s been coming since the GFC stimulus-driven recovery. Short-term thinking and no appetite for hard decisions
EDIT: The inevitable result of MMT unfettered by balancing fiscal and macro policy constraints
Exactly correct. This is so obvious & so predictable! The last 10 to 15 years & probably longer has been full of economic bullsh!t. The politicians & TBH 100% of the punters didn’t want to know about the consequences; they might be here now!
Plus 1000.
Exactly right. Given what was done in the past, the end result we are seeing now was inevitable.
Oh, oh, onion skin
You might see the trap
But you still fall in
When things start to roll
Your skin flies off
And the teardrops flow
*trumpet sound trumpet sound trumpet souuunnnndddd*
File under when investors flee to more lucrative paddocks …
And that is the rub … some wanted society administrated by investors [animal spirits], because they were the smartest people on the orb, EHM said so, all economic statism was a road[tm] to serfdom and a totalitarian gateway too ev’bal communism, so some now wobble on about how investors pull the plug just at the whiff of not getting the expected/desired return on ***Their [earned] Capital*** and in the blink of any eye entire society gets whip sawed into the pit …
The New Zealand Initiative (NZ Think Tank) Insights this week … with an emphasis on the globally widely read Wheeler / Wilkinson Report on monetary policy failings triggering inflation …
https://nzinitiative.outreach.co.nz/?Ns=&Na=view-msg-public&SMESG-oid=25414&Scontact=2149250d
… further related housing issues MB posts …
https://www.macrobusiness.com.au/2022/07/sydney-house-prices-crashing-at-record-pace/#comment-4306000
Founders: Merger between the New Zealand Business Roundtable and The New Zealand Institute … ugh …
Did it make a difference? … Michael Reddell … Croaking Cassandra blog
https://croakingcassandra.com/
Firstly New Zealand (and Australia) are countries that still offer a lifestyle and economies the majority of nations do not.
The ANZ Business Confidence has nil correlation with house prices., but after a day of ever desperate forecasts for the Australian housing market, anything to show a similar outlook for the New Zealand market was needed before the weekend.
New Zealand has a structural shortage of housing,, significantly worse than Australia , building fewer will not improve the situation. ( Ireland is an example ) House sales may collapse, prices will not.
Importantly, the NZD is bottoming against the USD, it will strengthen significantly over the coming five years.
P … what lessons have you learnt from the comparative performances of California and Texas through the GFC ?
New Zealand and Australia are really the ‘California’s of the South West Pacific’ with grossly excessive ‘multiple stretch’ …
What I wrote some time following the GFC comparing Texas and California housing performances … illustrating the basket case of California was likely ‘under – housed’ by about a million units in comparison with Texas.
It was noted too that California’s new residential approval / consent rate per 1000 population per annum had slumped to 1.0 … the lowest I’m aware of ever in the developed world.
If following the housing crashed here in the Antipodes, the consents approval / permit rate per 1000 population per annum slumps to the California ’09 level, that would suggest about 26,200 approvals per annum for Australia and 5,100 for New Zealand
Housing Bubbles: Jumbo Mortgages = Jumbo Problems … Hugh Pavletich … Scoop NZ News(March 2010)
https://www.scoop.co.nz/stories/WO1003/S00019/housing-bubbles-jumbo-mortgages-jumbo-problems.htm
… extract …
… California with an estimated population of 37.5 million and 13,393 million housing units, has approximately 357 housing units per 1000 population, while Texas with a population of 25 million and approximately 9.598 million housing units has 384 housing units per 1000 population. This would suggest that California should have at least 14.400 million housing units – at least a million more than is currently the case.
The State of California however, has in reality made it illegal to provide affordable housing, where people wish to work and live.
The California Building Industry Association reports that during 2009 there were just 36,289 residential permits issued – less than 1 / 1000 population, the lowest of any jurisdiction with population growth in the United States and the other countries covered by the Annual Demographia Surveys.
It is likely California’s permitting and housing construction rate during 2009 was worse than during the Great Depression of the 1930’s.
… and today …
House Prices Are Falling in These 10 U.S. Cities as Market Shifts … Newsweek
https://www.newsweek.com/housing-market-prices-falling-10-cities-united-states-1728749
U.S. Facing ‘Perfect Storm’ for 2008-Like Housing Crisis: Economist … Newsweek
https://www.newsweek.com/us-facing-perfect-storm-2008-like-housing-crisis-economist-1728011
Zillow Reports BIG Home Price Crash in 10 Cities (50% in One Year) … Reventure Consulting … Youtube
https://www.youtube.com/watch?v=zLWSXpAhIGY
Apples and oranges Hugh, both have completely different geological/environmental concerns and both cannot be both shoved down into some ideological hole. Wow is the whole world just some ridiculous cookie cutter notion of some equally ridiculous ideological notion …
Just let the numbers do the talking Skippy !
To ensure all dwelling types are affordable, it is essential to get rid of artificial scarcity values on the fringes and debt finance infrastructure properly.
The fringes should simply be seen as the ‘inflation vent’ of an urban market.
Numbers without grounding are crapola … and there is decades of evidence that shows RE is coupled with the issuance of REMBS which then gets sold to investors and then due to weak regulation goes boom … best bit is the mopes on the lower rungs of the property ladder then get fked and some absentee investor picks up on the cheap and then the BSD comes in and grabs market share only to be a price setter and now the recently fked wannabee RE [40 acres and a mule] pod people are now really stuffed because they will pay more of their wages without any capital formation …
Best bit is when your sort then trots out the family formation tropes/memes to suck in the unwashed for a dog box …
Do you work for blackstone – ?????
California … the global housing markets wrecking ball where nothing was learnt out of its GFC experience (read ‘Jumbo Mortgage Jumbo Problems via hyperlink up – thread) …
SF Bay Area Housing Prices Suffer Largest One-Month Drop On Record … Zerohedge
https://www.zerohedge.com/economics/sf-bay-area-housing-prices-suffer-largest-one-month-drop-record
Thanks to a combination of rising interest rates and economic uncertainty, Real Estate in the San Francisco Bay Area have begun to chill, sharply.
In fact, housing prices in the nine-county region suffered their largest one-month drop on record, falling 7% from May to June, with median prices of existing single-family houses dropping from $1.5 million to $1.4 million, according to the San Jose Mercury News, citing the California Association of Realtors. … read more via hyperlink above …
Nice one Phil.
New housing market data reveals a stunning shift as these 21 of the top 50 metro areas show price declines for June … Fortune …
… behind paywall …
https://fortune.com/2022/07/30/new-housing-market-data-reveals-a-stunning-shift-as-21-of-the-top-50-metro-areas-show-price-declines-for-june/
It’s finally happening. After soaring 40% from pre-pandemic levels in the greatest boom in decades, home prices peaked in June, and started falling in July. That’s the stunning, sudden shift revealed in a new set of data just introduced by the American Enterprise Institute’s Housing Center, one of the top sources for in-depth, city-by-city numbers on all things housing, from appreciation to inventories and mortgage originations. “The market just reached a turning point,” says Ed Pinto, the AEI Housing Center’s director. “Prices will keep falling on a national basis for August through December. It’s likely that we’ll see declines in around four out of five metros in some of the months ahead.” … behind paywall … read more via hyperlink above …
AEI Housing Center – American Enterprise Institute
https://www.aei.org/centers/center-on-housing-markets-and-finance/
Really? And we know what happens after all this overbuilding, don’t we?
“Between 1992 and 2006, new house prices in Ireland rose by a cumulative 300% in real terms and 340% in nominal terms. At the same time, the stock of housing grew by 150%. Much of the increase in real house prices may be explained by particularly strong housing demand fuelled by a negative real interest rates, favourable tax treatment of residential property and house purchase for investment purposes. Estimates of the degree of over valuation of real new house prices around the peak in 2006 vary between 20% and 40%.”
Dublin house prices fell by 15% in 2008. The REINZ HPI for Wellington City is already down 18%.
Ireland isn’t a good example to compare to NZ owing to their lack of monetary independence but I thought that statistic was remarkable.
Thankyou for your replay Janet, clearly your current understanding of Ireland is limited. referring to my comment “building fewer will not improve the situation. (Ireland is an example) “Building fewer has not improved Ireland’s situation , nor lowered housing costs
The number of dwellings per thousand inhabitants increased between 2011 and 2020 in all but six
countries: Croatia, Ireland, the Czech Republic, Iceland, New Zealand and Luxembourg. OECD 2022 https://www.oecd.org/els/family/HM1-1-Housing-stock-and-construction.pdfhttps:/
Housing stock/construction https://www2.deloitte.com/content/dam/Deloitte/at/Documents/real-estate/at-property-index-2021.pdf (good read)
/www.irishtimes.com/life-and-style/homes-and-property/no-quick-fixes-eight-ways-to-solve-ireland-s-housing-crisis-1.4570646
” Central Bank deputy governor Sharon Donnery has said if the number of people living in each house was in line with the EU average, there should be 260,000 more households in Ireland. In the five years leading up to the pandemic there was just one house built for every additional seven people in the population,
http://www.statista.com/statistics/525524/new-dwellings-completed-per-1000-inhabitants-in-republic-of-ireland/ially less than what’s required.”
Current rental report https://ww1.daft.ie/report/ronan-lyons-2022q1-daftrentalprice?d_rd=1
Shortage https://www.rte.ie/news/business/2022/0512/1297489-market-rents-rise-as-supply-hits-new-low-daft-ie/
Current house price report https://ww1.daft.ie/report/ronan-lyons-2022q2-dafthouseprice?d_rd=1
housing crisis Ireland https://www.irishmirror.ie/news/irish-news/row-erupts-dail-over-housing-26946944
House prices https://www.thejournal.ie/daft-report-house-prices-5800407-Jun2022/
https://www.thejournal.ie/stories-of-people-and-housing-in-ireland-5430959-May2021/
Rental crisis https://www.reuters.com/article/uk-ireland-economy-housing-idUKKBN2FA252
Crisis https://www.irishexaminer.com/news/arid-40926146.html
Collapse in home ownership rates https://tradingeconomics.com/ireland/home-ownership-rate
https://www.irishtimes.com/business/economy/2022/07/06/falling-home-ownership-rates-will-leave-future-retirees-financially-exposed-study-finds/
Dwellings per 1000 in Ireland currently below the OECD average and , substantially below the European average at 420 dwellings per 1000. New Zealand dwellings per 1000 is under 400.
House prices are determined by supply and demand in the housing market. House sales are very weak – we see this in the REINZ and auction clearance data – leading to rising inventory of unsold houses and lengthening days to sell. Both inventory and days to sell are highly correlated to house prices and both suggest prices will decline further.
As for the housing shortage argument, much of that depends on what starting point you assume is equilibrium, or what assumption you make for the equilibrium number of occupiers per house. But ignoring that, what we see is that supply>demand for two years now and given net outflows of migrants and weak population growth and a still strong pipe of completions to come, thats going to remain the case for at least another year.
Sure, longer term, consents fall – compounding the recession – and the government can open the immigration tap, but NZ isn’t perceived as desirable like it once was, Chinese can’t easily leave China etc… and foreigners are right now net sellers anyway.
All roads point to weaker prices.
Kiwis cashing up: Goodbye Auckland house prices, g’day Australia … Nikki Preston … OneRoof / New Zealand Herald
https://www.oneroof.co.nz/news/kiwis-cashing-up-goodbye-auckland-house-prices-gday-australia-41809
New Zealand lost 11,000 people in a year, Stats NZ says … Susan Edmunds … Stuff New Zealand
https://www.stuff.co.nz/business/300635298/new-zealand-lost-11000-people-in-a-year-stats-nz-says
Desirable tenants become scarcer as ‘accidental landlords’ add to rental glut … Geraden Cann … Stuff New Zealand
https://www.stuff.co.nz/business/129234603/desirable-tenants-become-scarcer-as-accidental-landlords-add-to-rental-glut
Employers and Manufacturers Association says NZ’s high cost of living, housing putting overseas workers off … Ireland Hendry-Tennent … Newshub (regrettably VIDEO not available outside New Zealand)
https://www.newshub.co.nz/home/new-zealand/2022/07/employers-and-manufacturers-association-says-nz-s-high-cost-of-living-housing-putting-overseas-workers-off.html
Housing crisis: One home across the decades shows how ‘make your own lunch’ and ‘save hard’ won’t cut it … Joanna Davis … Stuff NZ
https://www.stuff.co.nz/life-style/homed/housing-affordability/129376457/housing-crisis-one-home-across-the-decades-shows-how-make-your-own-lunch-and-save-hard-wont-cut-it
Migrant doctors struggling to find work despite healthcare staff shortages … Mildred Armah … Stuff NZ
https://www.stuff.co.nz/national/health/129382212/migrant-doctors-struggling-to-find-work-despite-healthcare-staff-shortages
The good, the bad and the weird: Wellington council report cards in … Tom Hunt … Stuff NZ
https://www.stuff.co.nz/dominion-post/news/wellington/129369472/the-good-the-bad-and-the-weird-wellington-council-report-cards-in
I was ‘never ever’ going to be able to buy in Auckland. So I moved … Joanna Davis … Stuff NZ
https://www.stuff.co.nz/life-style/homed/latest/129306259/i-was-never-ever-going-to-be-able-to-buy-in-auckland-so-i-moved
China update … guess who New Zealand’s biggest trading partner is ?…
China Mulls Seizing Builders’ Idle Land to Fund Frozen Projects … Bloomberg
… behind paywall … google search for possible open reprint …
https://www.bloomberg.com/news/articles/2022-07-29/china-mulls-seizing-builders-idle-land-to-fund-frozen-projects?srnd=premium-asia
China is considering a plan to seize undeveloped land from distressed real estate companies, using it to help finance the completion of stalled housing projects that have sparked mortgage boycotts across the country, according to people familiar with the matter.
The proposal, which is still under discussion and could change, would take advantage of Chinese laws allowing local governments to wrest back control of land sold to real estate companies if it remains undeveloped after two years, without compensation. That would give authorities more leeway to direct funds toward uncompleted homes, potentially to the detriment of creditors who would lose claims on some of developers’ most valuable assets.
While officials would have bandwidth to adjust the process to suit local conditions, a typical scenario would involve seizing land from a distressed developer and giving it to a healthier rival, which would in turn provide funding to complete the distressed developer’s stalled projects, the people said. The government could also rezone the seized land in some cases to increase its value, the people added, asking not to be named discussing private information. …
… China’s top 100 developers owned land parcels valued at 42.5 trillion yuan ($6.3 trillion) at the end of last year, according to China Real Estate Information Corp. Many of them borrowed heavily to buy the land, in hopes that prices would continue rising. … read more via hyperlink above …
Why Are People Across China Refusing to Pay Their Mortgages? What to Know So Far … Bloomberg
https://www.bloomberg.com/news/storythreads/2022-07-15/why-are-people-across-china-refusing-to-pay-their-mortgages-what-to-know-so-far?srnd=premium-asia
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Youth unemployment China
New data released on Saturday by China’s National Bureau of Statistics shows that youth unemployment hit 19.3 percent in June. It’s the highest level since the data was first made public four years ago; back then, the figure was as low as 9.6 percent.18/07/2022
China jobs: youth unemployment hits record high in June – nearly 1 in 5 young people out of work … South China Morning Post
https://www.scmp.com/economy/china-economy/article/3185473/china-jobs-youth-unemployment-hits-record-high-june-nearly-1
New Zealand’s Top Trading Partners … Worlds Top Ecports Com
https://www.worldstopexports.com/new-zealands-top-trade-partners/#:~:text=New%20Zealand's%20Top%20Trade%20Partners&text=From%202020%20to%202021%2C%20the,the%20Netherlands%20(up%2024.7%25).
Asia’s richest woman loses half her $24bn fortune in China property crisis … Agence France – Presse / The Guardian
https://www.theguardian.com/world/2022/jul/28/asias-richest-woman-loses-half-her-24bn-fortune-in-china-property-crisis
Yang Huiyan, a majority shareholder in Chinese property giant Country Garden, saw net worth plunge to $11.3bn in a year … read more via hyperlink above …
To get a sense of the current house & land package pricing in New Zealand … Golden Homes …
Golden Homes … House & Land Packages
https://goldenhomes.co.nz/house-and-land/all
Fascinating, 700k+ for a house in drained swampland.
V … note the 3 bed exercise for a staggering $739.5k in of all places Dunsandel … way way to the south of Christchurch
I dont’ know what the attraction of Dunsandel is now since they shut down the dog dosing strip there …
https://www.google.com/search?q=the+dog+dosing+strip+in+dunsandel+song&gs_ivs=1#tts=0
Dog Dosing Strips
There used to be an actual dog dosing strip at Dunsandel. It was located to the south of the town on a strip of grass between SH1 and the railway, and it was clearly marked as a dog dosing strip. This was in the late 1950’s, early 1960’s.
… to the extent there was a truly awful folksong written about it …
https://folksong.org.nz/dog_dosing_dunsandel/index.html#:~:text=Dog%20Dosing%20Strips,the%20late%201950's%2C%20early%201960's.
It sounds a bit like an Aussie guy singing it with that grating twang ! What do you think ?
New Zealand is fully reopening to the world, but how prepared are we? … Kelly Dennett … Stuff NZ
https://www.stuff.co.nz/business/300647250/new-zealand-is-fully-reopening-to-the-world-but-how-prepared-are-we
From 11:59pm on Sunday, all tourists will be welcomed back to New Zealand. Economists think they might be our best shot at getting out of a recession, but operators say tourism’s recovery will be slow. Kelly Dennett reports.
When the Pacific Explorer docks at Auckland in two weeks Kevin O’Sullivan will be there welcoming passengers.
The New Zealand Cruise Association chief executive admits that in March 2020 – the last time cruise ships docked in New Zealand – he was calling the border closures a “short-term pause”.
“I had no expectation I would be sitting here in July 2022 waiting for the first ship to come back. It has been difficult, quite depressing at times, but onwards and upwards. I’m really looking forward to [welcoming the ships back].” … read more via hyperlink above …
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Daily Passenger arrivals and departures – NZ Customs Service
https://www.customs.govt.nz/covid-19/more-information/passenger-arrivals-departures/
ANZ’s 15% house price plunge raises spectre of negative equity for recent buyers … Rob Stock … Stuff NZ
https://www.stuff.co.nz/business/129396922/anzs-15-house-price-plunge-raises-spectre-of-negative-equity-for-recent-buyers
Buyers’ market spreads: Number of homes for sale doubles … Susan Edmunds … Stuff NZ
https://www.stuff.co.nz/life-style/homed/real-estate/300650573/buyers-market-spreads-number-of-homes-for-sale-doubles
New data from property listings website Realestate.co.nz indicates that, while many parts of the country are now a “buyer’s market”, there’s no sign of a looming housing market crash.
Realestate.co.nz reports that the number of homes available for sale has increased steadily since mid last year.
In July last year, there were 12,684 on the market. At the end of July this year, that had lifted to 26,358.
Eleven regions had at least twice the housing stock this year compared to last, including Hawkes Bay, Nelson and Bays, Wellington, Bay of Plenty, Waikato, Central North Island, Manawatu/Whanganui, Wairarapa and Northland. … read more via hyperlink above …
The number of homes for sale has more than doubled year-on-year, with the national average asking price declining by $87k from its peak … Greg Ninness … Interest Co NZ
https://www.interest.co.nz/property/116973/number-homes-sale-has-more-doubled-year-year-national-average-asking-price
Buyers are now fully in control of the housing market as the number of homes available for sale doubles compared to a year ago, asking prices continue to tumble and the number of new listings remains above pre-pandemic levels, according to property website realestate.co.nz.
“The market has started to shift,” realestate.co.nz spokesperson Vanessa Williams said.
“We’ve seen a record number of consents form councils to build new homes and buyers’ FOMO (fear of missing out) decreasing.
“The scales have tipped.
“Buyers now have the edge,” she said.
At the end of July realestate.co.nz had 26,358 residential properties available for sale, more than double ( 108%) the number it had available at the end of July last year.
The meant the number of properties available for sale was at its highest level for the time of year since 2015. … read more via hyperlink above …
The Perfect Storm: Health And Housing Crisis Will See More New Zealanders Struggle To Access Aged Care Services … Aged Care Matters … Scoop NZ News
https://www.scoop.co.nz/stories/PO2208/S00002/the-perfect-storm-health-and-housing-crisis-will-see-more-new-zealanders-struggle-to-access-aged-care-services.htm