New Zealand housing indicators signal price crash

The Real Estate Institute of New Zealand (REINZ) has released its July survey of licensed real estate agents, which is wall-to-wall bearish and points to further heavy price falls for the nation’s housing market.

Below are key indicators presented in the survey.

First, a net 61% of responding real estate agents said they are seeing fewer people attending auctions, whereas a net 58% of agents reported seeing fewer people attending open homes:

New Zealand open home attendance

Kiwi home buyer demand has collapsed.

New Zealand’s median house price has already fallen 9.2% from its November 2021 peak. And a record 72% of real estate agents are seeing prices decline in their areas of operation. This is a massive turnaround from eight months ago when a net 70% of agents reported that prices were rising:

New Zealand house price expectations

New Zealand real estate agents bearish on property prices.

A year ago, Kiwi buyers were gripped with FOMO (‘Fear of Missing Out’). However, FOMO has all but evaporated with agents reporting only 4% of buyers showing FOMO:

FOMO in the New Zealand housing market

Buyers happy to wait on the sidelines.

In a similar vein, agents are reporting tanking buyer interest across the board spanning first home buyers, investors and overseas buyers:

New Zealand home buyer interest

Across the board falls in home buyer interest.

Finally, rising interest rates continues to be the number one concern facing Kiwi buyers, according to real estate agents:

Major concern of Kiwi home buyers

Rising interest rates buyers’ number one concern.

Commenting on the survey, author Tony Alexander noted:

There are many negative forces in play in the housing market currently — ranging from 3% to 3.5% increases in fixed mortgage rates, shortages of credit, shortages of construction staff and materials, net negative migration outflows, collapsed FOMO and soaring FOOP (fear of over-paying). The impact so far is an 86% rise in the stock of property listings from a year earlier, a decline in annual sales from 100,000 to 76,000, and an average 7.7% fall in prices.

The results of our latest survey of licensed real estate professionals throughout New Zealand have shown conditions to be broadly as weak as they were last month. Certainly not stronger.

The Reserve Bank of New Zealand’s ‘forward track’ guidance indicated that the official cash rate will rise from its current level of 2.0% to 3.9% by June 2023.

If that happens, then housing sentiment will collapse even further and price falls will accelerate.

Unconventional Economist
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Comments

  1. kiwikarynMEMBER

    CCCFA fix comes into effect tomorrow. We shall see what impact that has. Currently no-one can get a mortgage, so no point attending open homes or auctions.

  2. Hugh PavletichMEMBER

    Business confidence survey suggests ‘only way is down’ for economy, says ANZ … Susan Edmunds and Tom Pullar-Strecker … Stuff NZ

    https://www.stuff.co.nz/business/300629632/business-confidence-survey-suggests-only-way-is-down-for-economy-says-anz

    Declining business confidence and acute capacity constraints suggest the “only way is down” for economic momentum, ANZ economists say.

    The New Zealand Institute of Economic Research reported on Tuesday that its Quarterly Survey of Business Opinion for the June quarter showed business confidence had slipped to its lowest level since Covid first arrived in the country in March 2020.

    Despite facing uncertainty over Covid and rising interest rates, cost pressures on businesses were intensifying, NZIER said.

    ANZ economists Miles Workman and Finn Robinson said there was nothing in survey that would seem to stand in the way of the Reserve Bank raising the Official Cash Rate by 50 basis points both next week and in August, which would raise the rate from 2%, to 3%. … read more via hyperlink above …
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    Building sector cost pressures: Stagflation risk as profits slide, new survey reveals … Liam Dann … NZ Herald
    (behind paywall)

    https://www.nzherald.co.nz/business/building-sector-cost-pressures-stagflation-risk-as-profits-slide-new-survey-reveals/7BSSOXN74UMFPBSZF4KKC56OAE/

    Profitability in the building sector is being squeezed as firms face rising cost pressure but are unable to pass that on to buyers, a new business confidence survey shows.

    The latest Quarterly Survey of Business Opinion (QSBO) survey conducted by the NZ Institute of Economic Research (NZIER) shows overall confidence now at its lowest since March 2020, when the pandemic first hit.

    It prompted ASB economist Mark Smith to warn that stagflation may be on the horizon.

    Stagflation is a state where the economy is suffering from high inflation and recession – the worst of both worlds.

    The QSBO for the June quarter made grim reading and offered “little to cheer optimists”, Smith said.

    “[It] depicted stagflation-like conditions for the business sector, with shrinking economic activity, still intense capacity pressures and soaring prices and costs.” … behind paywall … read more via hyperlink above …

  3. Is anyone else sick of hearing about Fear of Missing Out, or FOMO. Its not bloody fear, its GREED.

    The world entered a period of hysteria when COVID struck, policymakers did rash and foolish things, investors responded with an orgy of risk taking – greed – and now policymakers are panicking again, over tightening and GREED has led to Fear. For those of us who weren’t greedy, who took profit, being short is fun, and there will be some juicy pickings in a few months.

    • Hugh PavletichMEMBER

      Peter … I think it would be fair to say we are currently going through a process of parting greedy fools from their easy money.

      Easy money is very lethal stuff indeed. It vaporizes and vanishes.

      As usual they will learn the hard way.

      By the way guys … whats the problem with the http://www.interest.co.nz website ? Seems to have been down most of the day.

  4. – I saw someone post the news that a house in Auckland that was listed for NZD 1.2 million sold for just NZD 800,00 (eight hundred thousand). Ouch & OMG.

  5. Hugh PavletichMEMBER

    No end in sight for falling house prices … Miriam Bell … Stuff New Zealand

    https://www.stuff.co.nz/life-style/homed/real-estate/129179266/no-end-in-sight-for-falling-house-prices

    House prices have taken their biggest quarterly tumble nationwide since early 2009, and it is unclear how long the downturn will continue, a property researcher says.

    CoreLogic’s latest house price index showed prices nationally fell by 0.8% in June, following declines of 0.8% in May and April. It left the national average at $1.01 million, up 12.8% from $906,532 at the same time last year.

    But the quarterly fall of 2.3% was the biggest drop over a three-month period since February 2009, which was just before the market bottomed out after the global financial crisis (GFC).

    The decline was widespread, with all the main centres, apart from Christchurch, recording quarterly price falls.

    Auckland and Wellington had the biggest drops, at 4.9% and 4.7%, which took their average prices to $1.44m and $1.07m respectively. … read more via hyperlink above …

    • Hugh PavletichMEMBER

      On a a price to income basis, the NZ Median Multiple (house price to income) is about double the size of Irish one that bust in 2007 … NZs peak at 9 Median Multiple with Irelands 4.7 tumbling to 2.8 across its metros by the 3rd qtr 2013. By various measures New Zealand’s bubble has burst between 5 – 9 per cent since November 2021 and is deflating around 2 to 3 times faster than the Irish bubble did …

      Helpful links …

      Demographia International Housing Affordability: All Editions ( access too ‘Interest Co NZ Median Multiple’ and Demographia United States Housing Affordability Survey 2022)

      http://www.demographia.com/db-dhi-index.htm

      Housing Bubbles Wikipedia (check out historical housing bubbles deflation velocity)

      https://en.wikipedia.org/wiki/Housing_bubble

      Stats NZ Building consents issued: May 2022 ( check in particular ‘consents rate per 1000 population per annum’ performance … and ask economists to compare with all others in the OECD. Note too … the rate for Canterbury is about the all time peak reached in year ending Dec 1973 at about 13.5 / 1000 … yet to be picked up by local economists and media)

      https://www.stats.govt.nz/information-releases/building-consents-issued-may-2022/

      Bloomberg recent OECD Housing Report … with New Zealand the riskiest housing market … This table has yet to be reprinted by the New Zealand heritage media. Why ?

      https://www.bnnbloomberg.ca/world-s-bubbliest-housing-markets-are-flashing-warning-signs-1.1782289

      • Hugh PavletichMEMBER

        Rental supply spikes while demand dwindles … Sally Lindsay … Good Returns

        https://www.goodreturns.co.nz/article/976520460/rental-supply-spikes-while-demand-dwindles.html

        Across the country the number of properties listed for rent surged 12% to an all-time high year-on-year in May, according to Trade Me’s latest rental price index but demand fell 8%.

        There were significant regional differences in the figures. Wellington’s listings lifted 45%, followed by Marlborough 24%, Auckland 16% and Manawatu/Whanganui 5%.

        However, listings in Northland, Waikato, Hawke’s Bay, Taranaki, Nelson-Tasman, Otago and Southland dropped compared to a year ago, while there was no change in Canterbury.

        All regions apart from Canterbury and Southland had a drop in demand from prospective tenants, with the biggest declines in Nelson/Tasman, down 28%, Northland 19%, and Taranaki 15%. Southland, up 8% and Canterbury, up 21% were the only regions to see demand for rentals climb when compared with May last year.

        The rental market is mirroring the property for sale market in May, with nationwide supply up 48% year-on-year, while buyer demand dropped by 9%.

        Rents drop for the first time this year … read more via hyperlink above …

  6. Hugh PavletichMEMBER

    Dileepa Fonseka: The New Zealand economy and its zombies … OPINION Dileepa Fonseka … Stuff NZ

    https://www.stuff.co.nz/business/129175343/dileepa-fonseka-the-new-zealand-economy-and-its-zombies

    OPINION: The zombie-killing moment some have had the popcorn out for all along increasingly looks like it is here. But it is not a Hollywood superhero with a sawn-off shotgun who is likely to do all the killing. Instead it is central bankers, a raft of economic shocks, the tax department and others who are likely to finish the job.

    We have heard much talk of zombie businesses over the last few years. Since Covid there has been an unusually low number of liquidations, and the theory was that some firms were saved from going under by the large amount of Covid support.

    Beyond this these are firms whose business models are no longer viable in a world where Covid-19 is endemic, who have overstretched and overleveraged themselves, or who are just poorly run. … read more via hyperlink above …
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    … Be aware of the realities of Covid 19 BA 5 … and future unknowns …

    BA.5 causes more severe disease … Dr John Campbell … Youtube

    https://www.youtube.com/watch?v=dnR917NUlNg&t=1s
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    Residential auction activity at a low ebb around the country … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116619/fewer-properties-were-offered-auction-last-week-sales-rate-edged-slightly-29
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    NZ housing: Why stating the obvious has become essential …

    The latest research series from the RBNZ highlights just how urgent it is that we avoid the toxic combination of fast rising population, masses of cheap debt and constrained housing supply in future, David Hargreaves says … Interest Co NZ

    https://www.interest.co.nz/personal-finance/116631/latest-research-series-rbnz-highlights-just-how-urgent-it-we-avoid-toxic

  7. Hugh PavletichMEMBER

    Average Auckland property values down more than $100k in 3 months, Wellington values also down sharply …

    CoreLogic says property values falling around the country – Waiheke Island had the biggest fall of $166,000 over the last three months … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116632/corelogic-says-property-values-falling-around-country-waiheke-island-had-biggest

    The average value of New Zealand homes has declined by $24,491 over the last three months, with average values in much of Auckland declining by more than $100,000, according to property data company CoreLogic.

    According to the CoreLogic House Price Index, the average value of New Zealand homes declined to $1,018,770 in June from $1,043,261 in March.

    The biggest drops occurred in Auckland where the average fall in values over the three months from March to June ranged from $166,738 in the Gulf Islands (mainly Waiheke) to $13,666 in Papakura.

    Apart from Waiheke, the biggest value declines in Auckland were in the upmarket central Auckland suburbs with most recording value drops of more than $100,000.

    Average values were also well down in Wellington, where declines ranged from $16,150 on the Kapiti Coast to $84,526 in Wellington City’s western suburbs.

    Over the same period average dwelling values have also declined in Hamilton by $10,937, Tauranga by $21,463, Gisborne by $3481, Napier by $34,562, Hastings down $24,564, Whanganui down $11,350, Palmerston North down $11,350, Porirua down $48,316, Upper Hutt down $64,513, Lower Hutt down $61,082, Dunedin down $16,771 and Invercargill $9218 lower. … read more via hyperlink above …

  8. Hugh PavletichMEMBER

    Job adverts see first ‘non-trivial’ fall since the Covid Delta days …

    Sharp falls in job ads in property-related industries see BNZ/SEEK Employment Report record 2.7% fall in overall job adverts last month, down from the record high level in May … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/business/116638/sharp-falls-job-ads-property-related-industries-see-bnzseek-employment-report

    Significant falls in job advertisements in property-related industries led to what’s described as the first “non-trivial” decline in NZ-wide job ads since the Delta days of last August.

    The latest BNZ/SEEK Employment Report has recorded a 2.7% drop in job ads for June, down from the record levels seen in May.

    The labour market has been boiling hot, with shortages of workers and an unemployment rate of just 3.2%.

    Reserve Bank Governor Adrian Orr has pointed to the strong labour market as being a key reason why households are going to be able to cope with the much higher interest rates now being seen.

    The RBNZ is widely expected to lift the Official Cash Rate by another 50 points next week to 2.5%, with most economists seeing the OCR hitting 3.5% by the end of this year. … read more via hyperlink above …