1. First home buyers quietly returning to the market
The latest CoreLogic Buyer Classification data showed that first home buyers (FHBs) have been steadily increasing their share of all property purchases lately, from 21% back in March to 25% by August. To be fair, the number of deals is still low. But this rise in the relative presence of FHBs nevertheless suggests that prices are now a bit more achievable for them, with the rise in the caps for First Home Grants and the removal of the caps for First Home Loans no doubt playing a part too. On the flipside, mortgaged multiple property owners (including investors) have seen their market share drop to an historical low of 21% – as they face up to the pincer movement of low gross rental yields (and slowing rental growth) and higher mortgage rates, as well as 40% deposits.
2. Still tough to get a low deposit mortgage?
The Reserve Bank’s latest mortgage lending stats will be out this week (covering new loans, top ups, and bank switches), and given that we already know property sales volumes were low again last month, so too will the banks have had another quieter month as well. My focus will be on the breakdown of the data by loan to value ratio. The share of owner-occupier lending at a high LVR dropped from 6.0% in June to 5.1% in July, so it’ll be interesting to see if it fell again in August. Keep in mind that the speed limit for this lending is 10%.
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3. Labour market probably still faring well
July’s figures for filled jobs were solid again, with a 0.5% monthly rise – the labour market remains a key support for the property market, keeping the downturn controlled rather than a messy crash. We’ll get August’s jobs data this Wednesday from Stats NZ, and there’s every chance that the figures will show a further rise. And even if the growth turns out to be small, that’s probably due more to a lack of skilled available staff rather than a shortage of firms wanting more workers.
CoreLogic chief economist Kelvin Davidson: "There’s reason to think that this downturn won’t be as deep as those in the past." Photo / Peter Meecham
4. Confidence up off the canvas?
We saw in the August results for ANZ consumer and business confidence some small signs of recovery, although costs/prices remain a key issue. There haven’t been too many shocks over the past month or so, hence my guess is that confidence on both measures may have continued to edge higher in September – businesses are due on Thursday and consumer sentiment on Friday. Of course, any improvement is from a very low base, so we shouldn’t get too carried away about the scope for a strong/rapid economic rebound just yet.
5. Dwelling consents likely to have dipped again
Finally for the week ahead we’ll get the August new dwelling consent figures from Stats NZ on Friday and I’m expecting there’ll be another decline compared to the same month last year – that would be the third fall in a row, clearly signalling that the long-awaited slowdown has begun. However, there’s a big pipeline of consents already approved (especially for smaller dwellings such as townhouses), and although some won’t ever be enacted, builders will still be busy for a while yet. Thereafter, there’s reason to think that this downturn won’t be as deep as those in the past, given the prospect of Government support for the sector (e.g. Build-Ready Development Pathway) and also incentives for both owner-occupiers and investors to keep buying new-builds, such as reduced deposit requirements and tax advantages.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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