2024’s underwhelming upturn
But plenty of people are still buying houses.
People are still buying houses – Real Estate Institute of New Zealand (REINZ) April 2024 data shows sales activity lifting in almost all regions compared to storm-affected April 2023. Prices have also edged up year-on year. And there are lots of houses to choose from – listings nationally increased by 34.9% year-on-year from 7,142 to 9,636, with Auckland listings up 41.1%.
In the meantime, households are feeling a little less buoyant
High interest rates are an issue for households, with approximately 60% of the country’s mortgages up for renewal within the next 12 months. Those who fixed two years ago will move from an interest rate of around 3% to 7%. That’s going to knock the wind out of some sails.
The Reserve Bank (RBNZ) says certain households are facing greater job uncertainty, while others are struggling to meet mortgage repayments. The share of home loans 90 or more days in arrears had risen from 0.2% in 2022 to about 0.5%.
In its half-yearly Financial Stability Report (FSR), the central bank said better wages were helping borrowers who had moved to a higher interest rate. However, scratching below the surface uncovers widespread worry. According to the Financial Services Council’s (FSC), more than two-thirds of households are suffering from financial stress amid job insecurity, increasing debts, high inflation and interest rates.
Labour market tightens
Unemployment is inching higher (from a low level), not because of job losses, but through the rising supply of labour off the back of high net migration.
Unemployment is set to rise to a three-year high of around 4.2% as too many people chase too few jobs and the recessionary environment persists.
Little wonder job ads fell 4.4% in April. The latest BNZ-Seek Employment Report shows job ads are now almost 30% down on a year ago, highlighting the extent of the slowdown in hiring.
Building consents falling
In the year ended March 2024, the actual number of new dwellings consented was 35,236, down 25% on the previous year.
Since 2022 the number of multi-unit homes consented dropped 23% and the number of apartments was at its lowest since 2016. Standalone houses were down 27%.
Falling consent numbers and a deepening construction downturn could cause another headache for the housing market – underbuilding, which is likely to elevate house prices.
With interest rates, inflation, and building costs remaining stubbornly high, supply isn’t likely to change in a hurry.
Brighter prosects on the horizon
New Zealand’s leading economic consultancy Infometrics reckons a rosier picture will emerge later this year and beyond, when the Reserve Bank is likely to lower the official cash rate (OCR) as high net migration continues and inflation falls faster than assumptions used in the October 2023 forecast.
Areas benefiting most from population growth would see improved business confidence and increased investment spending, Infometrics said. So, it’s very much an Auckland story. Additional people create additional spending, more buoyant demand conditions, and encourage more investment.
The Official Cash Rate has remained at 5.5% for a year now. Its full effects are now being felt. But people are still buying houses. Looking to sell? Call 0800 GOODWINS for an appraisal.
