Possible turning point as new listings and housing stocks rise

Possible “turning point” for housing market as new listings and housing stock rise

The latest data from realestate.co.nz suggests that November marked a turning point for what many have called New Zealand’s “runaway” housing market.

The property site’s CEO, Sarah Wood, says that the November dataset is an early indicator of more housing availability to come. “The New Zealand property market is taking an encouraging turn. The last time we saw our new listings this high was seven years ago in October 2014,” Sarah says. “And total housing stock (all the homes available on realestate.co.nz), has also gone up by 5.1 percent year on year. It looks like buyers will have more homes to choose from this spring and summer.” But new listings and total stock figures aren’t the only numbers perking up ears at realestate.co.nz. “Housing consents are at record numbers. Data from Stats NZ shows that the country has consents to build homes faster than we were in the 1970s, which indicates an increase in supply for property seekers in the future.” Wellington joined the million dollar club in November - its average asking price hit $1,002,190, up 27.3 percent when compared to the same time last year, and a 14-year record high. The region has been a compelling story for several months, setting trends that seem to be filtering into nearby regions. “Wellington’s market looks piping hot—new listings were up 21.8 percent and total stock was up a whopping 58.3 percent on November 2020,” Sarah says. “When we see higher numbers of total stock and new listings, it tells us that buyers are being more considered, and homes are being listed at a faster rate than they are sold. “In Wellington, this looks to be the case—and this is the third month in a row that the region is leading the charge. The capital continues to keep us on our toes.” The national average asking price is now $969,604 - also a 14-year record. The Coromandel (up 32.5 percent to $1,203,073), Gisborne (up 30.3 percent to $703,806), Auckland (up 23.3 percent to $1,264,601), Manawatu / Wanganui (up 26.0 percent to $671,919), Canterbury (up 24.4 percent to $672,248), Taranaki (up 22.3 percent to $615,774) and Otago (up 21.1 percent to $645,663), all broke average asking price records year-on-year. Although its average asking price cooled slightly in November month-on-month, Central Otago / Lakes District is still the most expensive region to purchase a property. A home in the region is now priced, on average, at $1,314,884—up 21.9 percent year-on-year. “It’ll be interesting to see if we see more stock coming to the market, and how that might affect the asking prices this summer,” Sarah says. CT

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For the first time in years, total housing stock is heading in the right direction

Only five regions saw their total stock go backward in November year-on-year: Central Otago/Lakes District (down -27.0 percent), the Coromandel (down -35.1 percent), Canterbury (down -18.7 percent), Northland (down -18.9 percent) and the West Coast (down -26.2 percent). But other regions, like Manawatu / Wanganui (up 70.4 percent) Wairarapa (up 63.5 percent), Wellington (up 58.3 percent), Hawke’s Bay (up 48.1 percent), Marlborough (up 32.3 percent) and Otago (up 29.2 percent) all saw notable increases in stock. This is a positive sign, suggests Sarah. “It’s been a few years since we’ve seen total stock increases like this. These numbers are heartening, and another early indicator that the winds of change are coming to the market. “Amongst other things, New Zealand needs to build more homes if we want to get on top of challenges like housing affordability. “The government has recently released their housing bill, which estimates that between 48,000 and 105,000 dwellings could be built in the next five to eight years. If this concept comes to life, we’re on the right track.” Wellington’s market looks piping hot—new listings were up 21.8 percent and total stock was up a whopping 58.3 percent on November 2020,

Falling property prices across the Tasman have left many in our housing market asking if the impact will soon be felt in New Zealand

Australian prices have already fallen 6.7 percent since their peak and Fitch said this was mostly due to lower investor demand thanks to tougher restrictions on lending.

These falls have given rise to the inevitable question on this side of the Tasman: will the downturn spread to the New Zealand market? Kelvin Davidson, senior property economist at CoreLogic, is not convinced that it will. His analysis is based on three major factors. “First, New Zealand does not generally have an oversupply of property of any type, or in any region. Indeed, our largest city of Auckland has the opposite problem: a large shortfall of housing, which is propping up values even though property is relatively unaffordable in our biggest city.” In Australia, on the other hand, it is widely accepted that there are too many apartments available in both the Sydney and Melbourne markets, which is having the effect of dragging down prices. So-called settlement risk, where a buyer who earlier bought an apartment off the plans suddenly ends up walking away from the transaction, is a growing problem for some of these large-scale developments, says Davidson. The second key difference he sees is that borrowers in this country have yet to experience the kind of increases in home loan interest rates that home buyers are seeing in other countries, including Australia. “In fact, although there are now signs that it might be ending, the banks here have recently engaged in a ‘rate war’, with borrowers enjoying some pretty sharp fixed-rate deals in recent weeks.” At the same time, in the New Zealand market about 80 percent of mortgage debt is on fixed interest rates. This means Kiwi borrowers will have some time to adjust their finances in advance of any interest rate increase being pushed through to their home loan. Completing the trifecta of Kiwi advantages highlighted by Davidson is the fact that New Zealand’s regulators have arguably been much more proactive than Australia’s in curbing the riskiest lending practices. “Interest-only lending is more controlled in New Zealand, and it’s also easy to forget that we’ve actually had the LVR (loan to value ratio) restrictions – in one form or another – here for five years now. This has put our mortgage market on a surer footing than Australia’s. “To be fair, none of this precludes a housing market downturn here in New Zealand at some stage in the future. But for now, and with the labour market a huge support for property, we’re confident that Australia’s problems won’t be replicated in New Zealand for the foreseeable future.”

In the New Zealand market about 80 percent of mortgage debt is on fixed interest rates.

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