Yesterday, the Real Estate Institute of New Zealand (REINZ) released its House Price Index (HPI) for June, which posted a 1.9% decline at the national level:
New Zealand house prices falling fast.
House prices nationally were also down by 5.4% over the June quarter, with every single major urban district posting quarterly falls:
Across the board house price falls.
The REINZ HPI is considered the most comprehensive and timely gauge of house prices in New Zealand because it is compiled from sales made by REINZ members as they become unconditional. Unlike median prices, the HPI also adjusts for movements in the composition of sales each month by analysing attributes such as land area, floor area, number of bedrooms etc.
For this reason, the REINZ HPI is used by the Reserve Bank of New Zealand’s (RBNZ) forecasting and macro financial teams.
Commenting on the result, Chief Executive at REINZ Jen Baird noted that “housing affordability remains an issue for many buyers on the market”, which “paired with tighter lending restrictions, higher interest rates and concerns over inflation” is driving “hesitancy amongst buyers”.
This negative sentiment won’t be helped by yesterday’s 0.5% rate hike by the RBNZ – the third double rate hike in a row.
The RBNZ flagged further aggressive rate hikes as it remains “resolute in its commitment to ensure consumer price inflation returns to within the 1 to 3 percent target range”. The RBNZ also stated that it “remains broadly comfortable” with its recent ‘forward track’ guidance of a 3.9% official cash rate by September 2023.
In short, the RBNZ will continue to aggressively hike interest rates to bring inflation under control. And this means that New Zealand house prices will continue to plunge.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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This thread has great posters, like Mr Peter, kiwikaren , Janet and P (or was it R?)
Don’t forget Hugh P!
Indeed
How much longer till it’s cheaper to buy a house in NZ rather than Aus??
After todays monumental employment data Goldman now sees Australian housing crash followed by explosion , penciling in 75bps for August ,and while a close call, we continue to expect the pace of hikes to slow to +50bp/25bp/25bp/25bp in Sep/Oct/Nov/Dec, to reach a terminal rate of 3.35% (vs 3.1% previously).
Add to Goldman, Deutsch bank and Numora
All expecting 0.75% hike
With 0.236 percent of total dwelling stock sold , the lowest adjusted June sales volume since dinosaurs roamed,, agents learn the arts of begging /urging and cajoling
Compare this housing bubble deflation velocity … from the November 2021 peak to this stage … and going forward … with earlier housing bubbles …
Housing Bubble – Wikipedia
https://en.wikipedia.org/wiki/Housing_bubble
… Check out current mortgage rates at Interest Co NZ …
https://www.interest.co.nz/borrowing
… Access yesterdays comprehensive MB posts …
https://www.macrobusiness.com.au/2022/07/reserve-bank-deals-fatal-blow-to-new-zealand-house-prices/#comment-4299719
NO MORE TOLERANCE for general inflation and housing inflation …as the IPSOS Issues Monitor make clear … the latest …
17th Ipsos NZ Issues Monitor – June 2022
… and too … consider carefully the clear structural definition of an affordable housing market …
https://www.macrobusiness.com.au/2022/07/reserve-bank-overshoot-pummel-new-zealands-housing-market/#comment-4295045
https://digitalfinanceanalytics.com/blog/tag/demographia/
As sound money is restored with the switch from QE to QT in conjunction with the normalization of interest rates, some may need to learn fast just what a structurally sound and affordable housing market is.
Bear in mind that the provision of affordable housing should be (if the politicians and planners hadn’t screwed it up) a straightforward formulaic business. … read more via hyperlink above …
Interest Co NZ – Median Multiples
https://www.interest.co.nz/property/house-price-income-multiples#:~:text=
Demographia US Housing Affordability – 2022 Edition
https://www.newgeography.com/content/007483-demographia-us-housing-affordability-2022-edition-released
Canada …
Bank of Canada hikes rate to 2.5% — here’s what it means for you … CBCNews
https://www.cbc.ca/news/business/bank-of-canada-rate-hike-1.6518161
Bank of Canada increases policy interest rate by 100 basis points, continues quantitative tightening … Bank of Canada
https://www.bankofcanada.ca/2022/07/fad-press-release-2022-07-13/
United States …
Fed Could Weigh Historic 100 Basis-Point Hike After Inflation Scorcher … Catarina Saraiva, Steve Matthews, and Jonnelle Marte… Bloomberg
https://www.bloomberg.com/news/articles/2022-07-13/fed-could-weigh-historic-100-basis-point-hike-after-cpi-scorcher?srnd=premium-asia
• Futures show one-in-two chance of super-sized July move
• 75 basis points now also in play for Fed’s September meeting
Federal Reserve officials may debate a historic one percentage-point rate hike later this month after another searing inflation report piled pressure on the central bank to act.
“Everything is in play,” Atlanta Fed President Raphael Bostic told reporters in St. Petersburg, Florida, on Wednesday after US consumer prices rose a faster-than-forecast 9.1% in the year through June. Asked if that included raising rates by a full percentage point, he replied, “it would mean everything.
Investors bet that the Fed is more likely than not to raise interest rates by 100 basis points when it meets July 26-27, which would be the largest increase since the Fed started directly using overnight interest rates to conduct monetary policy in the early 1990s. Americans are furious over high prices, and critics blame the Fed for its initial slow response.
Cleveland Fed President Loretta Mester, speaking Wednesday evening in an interview on Bloomberg Television, declined to say if she favored going bigger at the July meeting, noting there were important data releases between now and then. But she said there was “no reason” for raising rates by less than the 75 basis points that policy makers delivered last month. … read more via hyperlink above …
… and China …
China Convenes Banks on Mortgage Boycott Roiling Markets … Bloomberg
https://www.bloomberg.com/news/articles/2022-07-14/china-convenes-banks-on-mortgage-boycott-that-s-roiling-markets?srnd=premium-asia
More Chinese Homebuyers Refuse to Pay Mortgage Loans Amid Contagion Fears … Bloomberg
https://www.bloomberg.com/news/articles/2022-07-14/more-chinese-homebuyers-refuse-to-pay-loans-amid-contagion-fears?srnd=premium-asia
New Zealand ranked second-worst place in the world for expats, according to survey … Siobhan Downes … Stuff NZ
https://www.stuff.co.nz/travel/news/129273557/new-zealand-ranked-secondworst-place-in-the-world-for-expats-according-to-survey
New Zealand has been ranked the second-worst destination for living and working abroad, based on a global survey of expats.
InterNations – the world’s largest expat community – has released the results of its latest Expat Insider survey, with nearly 12,000 respondents representing 177 nationalities and living in 181 countries or territories quizzed about their experiences as expats.
Their insights, shared in 2022, were used to form a ranking of 52 destinations.
New Zealand was ranked 51st on the list, with only Kuwait doing worse. … read more via hyperlink above …
.
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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
Kiwis pay 25% more for groceries than Australians do, Finder survey shows … Brianna Mcilraith … Stuff NZ
https://www.stuff.co.nz/business/129247364/kiwis-pay-25-more-for-groceries-than-australians-do-finder-survey-shows
Nurse ‘ashamed and embarrassed’ to work in a health system in ‘tatters’ … Jennifer Eder … Stuff NZ
https://www.stuff.co.nz/national/health/129258754/nurse-ashamed-and-embarrassed-to-work-in-a-health-system-in-
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
The median house price lifted in June even as the HPI fell hard. That tells us there’s been a compositional shift in sales, and I’m guessing it indicates the mass market end has seen sales collapse, which makes sense as these are the buyers most reliant on marginal credit.
The fall in the HPI suggests that in aggregate those who purchased at the peak of the market with LVR>80% have seen their equity liquidated and given the falls seen in some markets it suggests some are likely now insolvent.
Worse, this fall in prices occurred before banks hiked their mortgage rates (sharply) in the last couple of weeks and before mortgage stress test levels rose and before banks announced a moratorium on LVR>80% lending. Given this, and the payment shock emanating from the mortgage market, its hard to conclude that house prices will do anything but continue to fall, with risk skewed to an acceleration of declines.
If you contrast this to the RBNZ Statement, you have to conclude the Bank’ MPC are living in La-La land. Their Statement on the current and future Outlook for the economy is, quite simply, delusional.
Thank you, so what made the banks decide on no lending below 20% deposit? Trying to figure if that will be copied here in Oz
The risk of negative equity and jingle mail as owners hand the keys back to the banks before getting on a plane to Australia.
United States …
Mortgage rates jump after two weeks of declines … Yahoo Finance
https://finance.yahoo.com/news/mortgage-rates-jump-143000137.html
China …
China On Verge Of Violent Debt Jubilee As “Disgruntled” Homebuyers Refuse To Pay Their Mortgages … Zerohedge
https://www.zerohedge.com/markets/china-verge-violent-debt-jubilee-thousands-disgruntled-homebuyers-refuse-pay-their-mortgage
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Remember what Professor Niall Ferguson has to say about the influence of the internet …
Historian Niall Ferguson on the roots of today’s political polarization … Long Now Foundation … Youtube
https://www.youtube.com/watch?v=yLiPPtxKRAA
and too … Professor of Transport Studies at the University of Sydney, David Levinson …
David Levinson … The New New Normal … The Transportist
https://transportist.org/2020/11/03/the-new-new-normal-mobility-and-activity-in-the-after-times/
China …
China’s Troubled Property Market Has Global Investors On Edge … Richard Frost … Bloomberg
https://www.bloomberg.com/news/articles/2022-07-14/china-s-troubled-property-market-has-global-investors-on-edge
• Homebuyers boycotting mortgage repayments on stalled projects
• Bank shares slide amid concern soured loans will rise
Former UBS Group AG economist Jonathan Anderson once called it “the most important sector in the universe.”
More than a decade on, Chinese property is again grabbing the attention of global investors — this time for all the wrong reasons.
Mounting signs of stress this week in an industry that accounts for about a quarter of the world’s second-largest economy are roiling China’s credit markets, dragging down the nation’s bank stocks and pummeling commodities from iron ore to copper.
After a burst of optimism earlier this year that looser regulatory curbs might stem the industry’s debt crisis, investors are getting spooked by rolling Covid lockdowns and a rapidly escalating homebuyer boycott of mortgage payments on stalled projects. The bigger worry is that a widespread loss of confidence in real estate will put major strain on China’s economy and financial system, which is sitting on 46 trillion yuan ($6.8 trillion) of outstanding mortgages and still has 13 trillion yuan of loans to the country’s beleaguered developers.
“Property has been getting steadily worse the whole time; prices, sales, starts, all terrible,” said Craig Botham, chief China economist at Pantheon Macroeconomics in London. “The chronic deterioration has now taken another step. It was always going to hit the financial sector eventually, given the prevalence of collateral in loan books with large real estate portions.” … read more via hyperlink above …
China Convenes Banks on Mortgage Boycott Roiling Markets… Bloomberg
https://www.bloomberg.com/news/articles/2022-07-14/china-convenes-banks-on-mortgage-boycott-that-s-roiling-markets?srnd=premium-asia
China’s Credit Market Is Moving Into Fresh Phase of Distress … Rebecca Choong Wilkins and Ailing Tan … Bloomberg
https://www.bloomberg.com/graphics/china-credit-2022-07/?srnd=premium-asia
China On Verge Of Violent Debt Jubilee As “Disgruntled” Homebuyers Refuse To Pay Their Mortgages … Zerohedge
https://www.zerohedge.com/markets/china-verge-violent-debt-jubilee-thousands-disgruntled-homebuyers-refuse-pay-their-mortgage
Customs stats show just over 9000 (net) people left NZ in the first week of July. Then strangely, the daily numbers have stopped being updated. I wonder why?
9000 people in one week, compared to a net loss of 30,000 over the 3 month period Apr-Jun as borders opened. It would appear the exodus is speeding up.