ANALYSIS: We are now more than two months down the track from November 23, when the Reserve Bank pushed the cash rate up a record 0.75 percentage points to 4.25% and warned of recession. In response to the bank finally pulling out the weapon of using scary words, we saw business and household sentiment measures fall away and housing market indicators get worse.
But as anyone who has raised children knows the shock impact of strong words fades over time and that is something we can see in three of my coalface surveys. My monthly survey of mortgage advisers with mortgages.co.nz showed three weeks ago that a net 13% of brokers were seeing fewer first home buyers coming in asking for advice.
This was better than the net 17% of December but still a lot worse than the 13% in mid-November who were seeing more first home buyers, let along the high net 48% of September and October. There has been a similar easing in pessimism regarding investor clients, though all the numbers have been far worse than for young buyers ever since the tax changes announced in March 2021.
Then there is my monthly survey of property investors undertaken with Crockers Property Management. Two weeks ago, a net 0% said they planned making a new purchase in the coming year. In December that reading was -5% from 1% in November and 2% in October. The shock has passed but the sentiment for investors remains as poor as ever.
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Interestingly though, the proportion saying that their major worry is falling house prices has eased to 6.6% from 7.8% soon after the Reserve Bank’s extra tightening and 6.7% before November 23. The change does not for a moment bespeak of a housing market upturn – just a backing away from the edge.
Then there is my monthly survey of real estate agents undertaken with REINZ. The survey is underway at the moment but the results so far from almost 500 agents again show a pulling back from the edge. But things are still overwhelmingly weak.
Independent economist Tony Alexander: “For cashed-up home buyers, the situation is the best in a generation.” Photo / Fiona Goodall
For instance, whereas in late-October a net 15% of agents said more first home buyers were in the market that fell to a net 16% seeing fewer at the end of November. The reading now is close to zero. The shift for investors is similar though the numbers are all much worse. Auction attendance remains very bad, but open homes seem to be attracting some more people.
Pulling back from the edge is not the same as turning direction for the better and almost across the board the various indicators in my surveys tell us that the outlook for house sales and prices in the first half of this year remains poor. The same implication for the economy overall can be made from the other surveys in hand showing business and consumer sentiment falling to record low levels after November 23.
But again, those surveys are also showing things pulling back from the edge to levels which are appalling rather than catastrophic.
For cashed-up home buyers, the situation is the best in a generation: listings are 37% ahead of a year earlier, investors are absent, FOMO is gone, and more and more vendors are (surely) getting realistic in their price expectations. It will be interesting to see how quickly buyers return once interest rates are moving down and expected to keep falling away more than has been the case recently for some lenders’ 3-5 year fixed rates.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz