Spring is in the air – just the thing to trigger a pollen allergy and, as it turns out, housing market activity.
Just weeks after August’s drop in the official cash rate, residential listing enquires rose by 8.5% compared with the two weeks prior, according to figures published by realestate.co.nz.
The real estate sector in New Zealand is famously seasonal, and Spring is typically regarded as the ‘second boom’ listing season (after the mid-summer season) on the real estate calendar.
But some pundits argue that the current rise in activity goes deeper than seasonality and could be the harbinger of a more marked uplift.
Here’s what’s happening:
- Interest rates are headed lower, which is relieving pressure on borrowers.
- New lending is increasing. Latest July figures recorded $6.7 billion of new lending – up $1.7bn year-on-year.
- The share of property purchases by first home buyers increased to 27% (July), up from 26% in Q2 and well above the long-term average of 21%. Buyers look to be taking advantage of low deposit lending allowances following the loosening of loan-to-value ratio rules.
- Investors are in the game, too. A closer look at July data shows that the share of lending to investors with deposits of less than 35% was 20%, up from less than 1% in June. CoreLogic Buyer Classification data suggests these investors are keen on new-build properties. Specifically, mortgaged multiple property owners (MPOs, including investors) accounted for 31% of activity in that segment in July. Could it be that with cash top-ups dropping and mortgage rates heading on a downward trajectory, investors are dipping their toes again?
House prices stable
Spring might have sprung, but the blossoms so far haven’t triggered a significant change to house prices or sales volumes. Still, it’s early days.
The seasonally adjusted REINZ House Price Index fell 0.4% in August over July, with national prices still marginally lower than a year ago and a median price of $765,000. You might call that stability.
REINZ chief executive Jen Baird is a little more bullish. “This month, we saw further signs of a change in market sentiment, with local agents reporting increased confidence in vendors and purchasers, the return of investors, and increased activity, particularly at open homes over the last two weeks of August,” she said.
Eight regions saw an increase in sales last month compared to the year earlier, with rises in Northland (+22.7%), Hawke’s Bay (+21.6%) and Bay of Plenty (+16.2%) topping the list.
You can count on economists for a more reserved outlook. The crew at ASB said housing data remained subdued, though they expected housing market activity to strengthen over the remainder of 2024, supported by further interest rate cuts.
“As the Reserve Bank has now cut the OCR and signalled more interest-rate cuts to come, we expect there will be more housing market activity over the remainder of 2024 as people increasingly respond to the falls in interest rates,” the bank economist said. “However, we have not seen any material changes in the key drivers of house price movements for the time being. We expect little change in overall house prices over 2024 given the large inventory of dwellings still on the market.”
Buyers have more to choose from
The national inventory level is up 30% year-on-year to 29,579, according to August REINZ data. That’s good news for buyers as the industry enters the busy season.
REINZ measures inventory based on the number of weeks of sales current listing volumes represent. Auckland entered spring with 29 weeks of inventory, four weeks more than at the same time last year.
Picking a turnaround
CoreLogic chief property economist Kelvin Davidson reckons it’s too early to say for sure whether the Auckland market is on the cusp of a turnaround.
“We tend to see data on a monthly cycle, so picking up on what might have happened over the past few days is tricky. Certainly, in June there was no evidence of that. Sales were still very, very soft and interest rates were still high with prices dropping further…. Things are still very subdued, but turnarounds always start somewhere. It’s not going to be like this forever.”
Picking a market turnaround is only possible in hindsight. However, a range of indicators point to growing confidence and activity in the Auckland market. Thinking of selling? There are plenty of people looking to buy. Call 0800 GOODWINS for an appraisal.