New Zealand house prices plunge at fastest pace since GFC

I reported yesterday how realestate.co.nz registered heavy house price falls across New Zealand, with the national average asking price of properties listed for sale plunging 8.8% from its January peak.

The falls have been even steeper across Auckland, where the average asking price has tanked 11.9% from its January peak.

In a similar vein, auctioneer Barfoot & Thompson had one of its worst July’s ever for sales, with the median selling price plunging $130,000 from its November 2021 peak of $1,240,000.

Today, CoreLogic reports that New Zealand house prices are plunging at their sharpest pace since the Global Financial Crisis in 2008, with values falling across all six major regions in July:

The national measure of property values fell a further -0.9% in July, taking the three month drop in values to -2.5%, the largest quarterly fall since October 2008 (-3.4%)…

Each of Aotearoa’s six main centres recorded value falls over the month…

“Housing affordability remains significantly stretched despite values falling, with the combination of high prices, following a significant upswing in values, and increasing interest rates restricting the number of buyers who are able, let alone willing, to borrow the sums of money required to buy property”…

“Loan-to-value (LVR) restrictions also sit at their tightest setting on record, with banks remaining below the allocated 10% speed limit. The increase in listings on the market over the past year or so has also switched pricing power towards buyers.”

The Reserve Bank of New Zealand last month stated that it would continue to hike interest rates to contain inflation, which hit a 32-year high 7.3% over the June quarter. Accordingly, New Zealand house prices will continue to fall.

The upshot is that after experiencing one of the world’s biggest price booms over the pandemic, New Zealand housing is now facing one of the biggest busts.

Unconventional Economist

Comments

  1. Hugh PavletichMEMBER

    News just out today ! …

    Surprise as official unemployment edges up to 3.3% … Tom Pullar-Strecker … Stuff NZ

    https://www.stuff.co.nz/business/129453699/surprise-as-official-unemployment-edges-up-to-33

    Statistics New Zealand says the unemployment rate has risen to 3.3% from 3.2%, while private sector hourly wages have risen 7.1% … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/business/116980/statistics-new-zealand-says-unemployment-rate-has-risen-33-32-while-average-weekly

    Unemployment has unexpectedly risen – albeit only by a fraction to 3.3% from 3.2%, according to Statistics New Zealand.

    Wages have risen by more than expected, with private sector hourly earnings up by some 7.1%.

    Statistics New Zealand said that the unemployment rate as at the end of the June quarter was 3.3%.

    Economists had expected a continued fall in the rate, with predictions it may get down to 3% or even lower.

    While the rise in unemployment might actually provide the Reserve Bank (RBNZ) with some sense of relief, the increase in wages will not.

    Westpac acting chief economist Michael Gordon said for the RBNZ, the “strong wage inflation outcomes” will likely be the most significant part of Wednesday’s reports.

    “The risk for the RBNZ is that wage pressures provide an avenue for the recent bout of price shocks to turn into sustained inflation over time. We’ll review our OCR forecasts later today, but the risks are clearly towards a higher peak than the 3.50% that we have been forecasting for some time,” Gordon said.

    Stats NZ has a number of measures for wage rises. It said wage inflation, measured by the labour cost index (LCI), was 3.4% in the year ended June 2022, while average ordinary time hourly earnings rose 6.4%. … read more via hyperlink above …

    Dairy prices fall … again … Interest Co NZ ‘Breakfast Briefing’ …

    https://www.interest.co.nz/business/117000/dairy-prices-fall-again-low-demand-us-retail-rises-us-job-openings-fall-china

    … extract …

    … Overshadowed this morning by that Pelosi trip to Taiwan, the dairy auction delivered another weak result, down another -5% from the prior event. That means overall prices are now down -27% from the peak in March. The WMP price fell -6.1% and more than the fall expected. The SMP price fell -5.3% and also more than expected. Butter also fell -6.1%. Despite global reductions in milk supply, this auction didn’t bring a respite from falling demand. Farm gate payout forecasts will now need to be pared back as this run of price declines is now well embedded and prospects for a turn higher seem to have faded. Expect analysts to start this trimming adjustment later this week. Today’s decline was the fourth in a row, and the ninth of the past ten.

  2. Hugh PavletichMEMBER

    Biggest fall for residential property values since the GFC, CoreLogic says …

    Average housing values in Auckland down by more than $85,000 since March … Greg Ninness … Interest Co NZ

    https://www.interest.co.nz/property/116996/average-housing-values-auckland-down-more-85000-march

    The average value of New Zealand homes fell by $33,599 over the last four months, while the average value of homes in Auckland declined by $85,452, according to the CoreLogic House Price Index.

    The Index tracks the value of all of NZ’s developed residential properties, excluding vacant land, based on sales data over the previous three months.

    It shows that the national average value has declined in each of the last four months, to $1,009,662 in July from $1,043,261 in March.

    In the Auckland region the drop in value has been greater, falling to $1,434,889 in July from $1,520,341 in March.

    The table below shows the current average dwelling values in all urban areas throughout the country and how much they have changed in percentage terms compared to three months ago and 12 months ago. This shows dwelling values are now in decline in most of the North Island and also the top and bottom ends of the South Island. … read more via hyperlink above …

    New Zealand House Prices Sink Most Since Global Financial Crisis … Tracy Withers … Bloomberg

    https://www.bloomberg.com/news/articles/2022-08-02/new-zealand-house-prices-sink-most-since-global-financial-crisis

    The global housing boom is running out of steam … The Economist reprint Stuff NZ

    https://www.stuff.co.nz/business/property/300651757/the-global-housing-boom-is-running-out-of-steam

  3. Hugh PavletichMEMBER

    The apparently contradictory nature of the latest labour market figures – showing rising unemployment, but very fast-rising wages – gives the RBNZ a whole lot to think about as it ponders its next Official Cash Rate review … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/business/117015/apparently-contradictory-nature-latest-labour-market-figures-showing-rising

    So, what is the Reserve Bank (RBNZ) to make of the latest labour market figures that on the face of it tell it to do two complete different things?

    The surprise rise in unemployment might, at first flush, suggest the RBNZ may be able to think about backing off somewhat with its current super-aggressive interest rate hiking cycle.

    The perhaps even more surprising very sharp rise in wages is possibly suggesting something else. Maybe it needs to get MORE aggressive with those Official Cash Rate (OCR) rises because clearly a wage-price spiral is now under way that could put a bonfire under that already hot 7.3% inflation rate.

    Undoubtedly the folk at the RBNZ will be looking to get under the hood over the next few days to work out in minutiae just what this labour market data is telling us.

    The slight rise in unemployment from the previous record low of 3.2% (where it had been for each of the December 2021 and March 2022 quarters) to 3.3% could be telling us that the peak has been reached and the labour market will now start to cool.

    But, with employment levels not budging at all, the suspicion has to be that there just are not the people to fill the jobs. So, in effect we’ve reached a bit of a stalemate. Employment can’t grow. Unemployment can’t shrink. If that’s the case it doesn’t suggest the labour market is getting any cooler. Far from it. … read more via hyperlink above …

  4. Hugh PavletichMEMBER

    New Zealanders Are Working More But Earning Less In Real Terms! … Martin North … Digital Finance Analytics

    https://digitalfinanceanalytics.com/blog/new-zealanders-are-working-more-but-earning-less-in-real-terms/

    https://www.youtube.com/watch?v=LKXWhd4kUrk

    Interesting data from Statistics New Zealand today on employment and wages today. They show that New Zealand unemployment unexpectedly rose from a record low in the second quarter but wages rose at the fastest pace in 14 years – though still well below inflation – suggesting the central bank may need to keep raising interest rates aggressively to tame inflation.

    The jobless rate climbed to 3.3% from 3.2% in the first quarter, which was the lowest level since records began in 1986. Economists expected a decline to 3.1%. Employment was unchanged from the previous three months. The underutilisation rate was 9.2 percent, compared to 9.3 percent in the March 2022 quarter.

    Wage inflation, measured by the labour cost index (LCI), was 3.4 percent in the year ended June 2022, the fastest since 2008 and up from 3.0 percent in the year ended March 2022, while average ordinary time hourly earnings rose 6.4 percent. While wages have lifted over the past year, annual consumer price inflation has exceeded annual wage inflation over the same period. The consumers price index (CPI) increased 7.3 percent in the year ended June 2022…. read and view more via hyperlinks above …

  5. Hugh PavletichMEMBER

    Cheat sheet: Is NZ’s home building supplies market competitive? … Melanie Carroll … Stuff NZ

    https://www.stuff.co.nz/business/industries/129463714/cheat-sheet-is-nzs-home-building-supplies-market-competitive

    On Thursday the Commerce Commission releases its draft report into whether New Zealand’s residential building supplies market is as competitive as it should be.

    The consumer watchdog has been investigating since November 2021 in its third market study since Parliament passed a law in 2018 giving it the power to shine a light on certain sectors.

    It finished a market study into supermarkets and the retail grocery sector in March, and in 2019 delivered its report on competition in the retail fuel market.

    This report is expected to go beyond the headline-grabbing shortage of plasterboard in a market dominated by Fletcher Building’s Gib board, but what exactly will we find out?

    What can we expect to see tomorrow? … read more via hyperlink above …

  6. Hugh PavletichMEMBER

    Pay Attention; This Is Not The ’70s … Zerohedge

    https://www.zerohedge.com/markets/pay-attention-not-70s

    Asia’s richest woman loses more than half of her $23.7BILLION fortune as China’s real estate sector crashes … Daily Mail

    https://www.dailymail.co.uk/news/article-11057293/Asias-richest-woman-loses-half-23-7BILLION-fortune-China-real-estate-crash.html

    New Zealand house prices see fastest drop since GFC, but first homebuyers still shut out of market … Eva Corlette … The Guardian

    https://www.theguardian.com/world/2022/aug/03/new-zealand-house-prices-see-fastest-drop-since-gfc-but-first-homebuyers-still-shut-out-of-market

    Check out the excellent graph based on Redfin data ‘Median Home Value by State’ … bubble pricing is stuffed in the internet accelerated era of dispersal and decentralization … and too … with the restoration of sound money…

    Home prices are dropping throughout California. This Sacramento-area county is an exception … Ryan Lillis … The Sacramento Bee

    https://www.sacbee.com/news/business/real-estate-news/article264059676.html

  7. Hugh PavletichMEMBER

    Building supplies market ‘not working as well as it could’ Commerce Commission says in draft report into competition in the residential building supplies industry … Rebecca Stevenson … Interest Co NZ

    https://www.interest.co.nz/business/117027/building-supplies-market-‘not-working-well-it-could’-commerce-commission-says-draft

    Latest labour market data showing ‘severe capacity constraints and intensifying wage pressures’ prompt change of view and perceived need for the Reserve Bank to do a little more against inflation … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/business/117029/latest-labour-market-data-showing-severe-capacity-constraints-and-intensifying-wage

  8. Hugh PavletichMEMBER

    Nation of Debt: Banks need to do better on business lending – economist … Liam Dann … NZ Herald
    … behind paywall …

    https://www.nzherald.co.nz/business/nation-of-debt-banks-need-to-do-better-on-business-lending-economist/MKWUJ5K2XABAQHRBNQV6FFY4QA/

    Unlike mortgage and consumer debt, borrowing for business is one area where economists would prefer to see the numbers rising.

    More borrowing suggests firms are confident enough to invest in growth and therefore that the economy is in good shape.

    More business borrowing also usually means more investment which is likely to lead to higher rates of productivity – something that is much needed to drive New Zealand’s economic growth.

    Latest Reserve Bank figures show business borrowing starting to rise again after an initial pandemic slump.

    Annual growth in business lending dropped sharply from 6.5 per cent in August 2019, into negative territory through until mid-2021.

    But since then it has risen sharply – at a rate of almost 9 per cent in the past year.

    That’s heartening and reflects a post-lockdown bounce back, says RBNZ manager financial system analyst Chris McDonald. … read more via hyperlink above …

  9. Hugh PavletichMEMBER

    Gib shortage ‘over’ due to construction industry slowdown … Daniel Smith … Stuff NZ

    https://www.stuff.co.nz/business/129468354/gib-shortage-over-due-to-construction-industry-slowdown

    Builders across the country say the plasterboard supply crisis is over because of a slowdown in the construction industry.

    A drop in building consents and construction activity, combined with the supply of other plasterboard brands had meant the product had been easier to access recently than it had been in the last six months, they said.

    Your Place Building director Josh Chapman​ said the plasterboard supply crisis was over for his firm, but so was the boom time for the construction industry.

    “Jobs that a month ago would have been a shoo-in are not going ahead. These jobs that are not happening are having a greater impact on the supply chain than anything else,” Chapman​ said. … read more via hyperlink above …
    Builders welcome call for more competition in building supplies sector … Daniel Smith … Stuff NZ

    Builders welcome call for more competition in building supplies sector

    Unemployment is near record lows, so why are more people getting social welfare? … Susan Edmunds … Stuff NZ

    https://www.stuff.co.nz/business/300653977/unemployment-is-near-record-lows-so-why-are-more-people-getting-social-welfare

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