1. G’day, mate
The Q4 figures on buying and selling of NZ property by people without citizenship/residency visa will be published by Stats NZ on Tuesday, and probably won’t get much fanfare – as they’ll still be low. Anecdotally, though, there does seem to have been a pick-up in interest from Australians (who are exempt from the ban), so it’ll be interesting to see if that shows up in the figures. But even if they have been buying in slightly greater numbers, I still wouldn’t automatically jump to the conclusion that this has somehow significantly altered prices.
2. Inflation steady but still high
Last week’s figures showed that inflation on the consumers price index (CPI) was unchanged in Q4, remaining at 7.2%. Categories such as food, rent, and building a new house were key contributors to the Q4 inflation figure – which was lower than the Reserve Bank’s previous indication (November) that inflation could have been as high as 7.5% for Q4. But it’s still a worryingly high number, and broadly speaking, above what bank economists had been anticipating.
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On balance, the figures may curtail talk of “only” a 0.5 percentage point lift in the official cash rate on February 22, and shore up the chances of a rise of 0.75 percentage points. But equally, some have interpreted the data in a more relaxed way, and now envisage a 0.5 percentage point rise as the central scenario. Either way, it may not change the mortgage rates path too much (given that a relatively large OCR rise had already been priced in by the financial markets), and it won’t help to ease household financial strains.
In other words, even if mortgage rates are close to, or at, a peak, there’s no escaping that it’s still expensive to be a new borrower and that many existing borrowers are yet to face up to the full extent of the rate increases already seen. Further downwards house price pressure is the net result.
3. NZAC and business confidence highlight recession risks
Adding to the more downbeat tone of the latest economic data, the December NZ Activity Index showed an annual change of just 0.2%, the lowest since the index was flat in September 2021. And on top of that, although ANZ’s business confidence measure did bounce back a bit in January, it’s still low – and cost/price pressures are still a large concern. The combined message of these two indicators, then, is certainly a continued risk of recession this year.
CoreLogic chief economist Kelvin Davidson: “Even if mortgage rates are close to, or at, a peak, there’s no escaping that it’s still expensive to be a new borrower.” Photo / Peter Meecham
4. Labour market in the spotlight this week
Alongside inflation, the other part of the Reserve Bank’s monetary policy focus is the labour market, where we’ll receive more fresh data this week. December’s filled jobs figures are due (potentially creeping upwards again), as are the official Q4 measures for employment, the unemployment rate, and wages (Wednesday). Needless to say, these are really key indicators, and will be another vital part of the puzzle for the Reserve Bank. A steady unemployment rate (at low levels) may reinforce a 0.75% rate rise, but any signs of rising unemployment might give them a little pause for thought.
5. Mortgage lending would have been lacklustre in December
We already know that property sales volumes in December were very low, and it’s almost certain that the Reserve Bank’s mortgage lending stats (due this week) will tell the same story. As ever, my focus will be on the breakdowns of the data, such as by loan to value ratio and by payment type (e.g. interest-only). As a reminder, the recent figures have been showing that getting a low-deposit loan remains very difficult for everyone, and nearly impossible for investors – unless buying a new-build.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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