Independent economist, Tony Alexander, has released his monthly New Zealand mortgage advisers survey, which shows that buyers continue to step back from the housing market in response to the Reserve Bank’s aggressive interest rate hikes, with many no longer qualifying for a loan.
The net number of advisers that are seeing more first home buyers in the market has “fallen back into negative territory for the first time since July. A net 17% now are seeing fewer young buyers as opposed to a net 13% last month seeing more and a strong net 48% in both September and October”:
First home buyer demand tanks.
The two key factors reducing first home buyer demand are:
- Test rates have increased to 8.60%.
- LVR restrictions.
Mortgage advisors are also seeing fewer investors in the market, which “has gone back to levels in place since early-2021”:
Investor demand weakens further.
In particular, “the removal of tax deducibility has significantly removed huge amounts of servicing capacity”.
Mortgage advisers have turned especially bearish on Auckland, noting “the market has dropped off a cliff in past week or so with people taking a break I think until the new year”. There is “less enquiry again after another round of interest rate increases”. This has “spooked the market” and there is now “more enquiry about refixing and a lot of gulping at the new repayments”.
The most recent mortgage data from the Reserve Bank certainly supports these views. It showed that the annual value of mortgage commitments had plummeted from a peak of $101 billion in September 2021 to $74.7 billion as at October 2022:
New Zealand mortgage commitments crashing.
House price inflation expectations have also collapsed to their lowest level since the depths of the pandemic, suggesting New Zealanders have become even more bearish on house prices:
New Zealand house price expectations collapse.
The above mortgage data from the Reserve Bank pre-dates the latest 0.75% interest rate hike, which has driven mortgage rates higher.
The Reserve Bank’s latest Statement on Monetary Policy also flagged further rate hikes in 2023, alongside a recession and a 20% peak-to-trough fall in house prices.
No wonder New Zealand home buyers have retreated into their caves. Why purchase now when their own central bank has tipped further rate hikes, a recession and more heavy price falls?
