Residential Housing Market – NZ QUARTERLY MARKET REPORT – Q4 2019 released today

Source: CoreLogic

According Kelvin Davidson, our NZ senior economist, it was another intriguing year for NZ’s property market in 2019. And for 2020, he’s predicting even more ‘swings and roundabouts’ for the market.

Kelvin Davidson writes: Activity was relatively subdued last year, partly due to controlled credit conditions as well as a tight supply of listings, and values had an early-year lull (centred on Auckland) before reigniting late in 2019. The year ahead looks set to see sales volumes rise gradually, with values also likely to increase further too.

The macroeconomic environment looks supportive for property in 2020. Admittedly, GDP growth will probably be slower than it has been recently, at 2-2.5% annually. However, that is still a decent pace, and should help to create more employment. Net migration is also likely to remain elevated, as NZ remains an attractive destination for work and living. All of this adds up to further growth in property demand, both rented and owner-occupied.

Credit conditions also eased towards the end of 2019 (e.g. the banks’ internal serviceability tests) and although the loan to value ratio rules aren’t likely to be relaxed any further this year, mortgage lending activity looks set to continue to rise for at least the first half of 2020. This will help sales activity levels to improve, although it remains to be seen how much of a rise is actually possible in the current listings-constrained market.

We wouldn’t be surprised to see the recent rebound in mortgaged investors’ activity (as shown by the CoreLogic Buyer Classification series) continue in 2020. The scrapping of the capital gains tax proposals back in April last year has bolstered investors’ confidence, while the low returns available on alternative assets (e.g. term deposits) are likely to continue to make property look relatively attractive. Investors don’t have it all their own way, however, with first home buyers holding their ground in many parts of the country.

By contrast, movers (i.e. existing owner-occupiers who are relocating) are fairly quiet at present, in many cases because they are concerned that the lack of available listings will mean they can’t find their ideal next property (which if course further restrains listings).

New Zealand Asset Classes:

·         Residential Real Estate: $1.2 trillion
·         ($277 billion in home loans)
·         Commercial Real Estate: $223 billion
·         NZ Stocks: $167 billion
·         NZ Super & KiwiSaver: $106 billion

Report Includes the following:

·         NZ and Australia GDP growth
·         NZ Population
·         Migration
·         Regional Building Consents
·         Consumer Confidence
·         Employment
·         Interest Rates
·         Lending conditions
·         Sales Volumes
·         Values
·         House Price Index
·         House Price Index
·         Rent
·         Buyer Classification
·         Auckland Market Activity
·         Auckland Values
·         Auckland Suburb Value Change
·         Current Suburb Values: ‘Mapping the Market’