1. Movers could be poised to start moving again
The latest CoreLogic Buyer Classification data shows that movers (relocating owner-occupiers) have actually been tending to stay put lately – due to factors such as low confidence, financing restraints, and a lack of ‘fresh’ listings to choose from. The relative lack of movers has reflected similar trends for each sub-group too, including upsizers, downsizers, and people shifting to new areas.
That said, it wouldn’t be a surprise to see movers start to become more active again in the coming months, which of course helps on the supply side too – after all, an owner-occupier buying their next house is also listing a property as well (in most cases). More moving could reflect some households looking to upsize and get that bigger/flasher property before any medium-term growth in house prices pushes it out of reach again.
Meanwhile, downsizing could be also be a feature, as a form of protection against mortgage stress – i.e. sell and reduce debt levels before there’s any risk of a tricky conversation with the bank and potentially a forced/mortgagee sale.
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2. Investors with a 35-40% deposit benefit from LVR change
Overall lending activity across new mortgages, top-ups, and bank switches was $5.7bn in June, still lower than a year ago, but the rate of decline has certainly slowed right down. Part of that reflects signs of a turnaround for owner-occupier lending, although loans to this group at a high LVR (>80%) remain subdued – about 6% of lending in June, versus new speed limit of 15%.
Meanwhile, overall lending flows to investors are still pretty quiet, and only 0.3% of investor loans in June had a high LVR (new defined as >65%), well below the 5% speed limit. But the reduction in the investor deposit requirement on 1st June (from 40% to 35%) did see a sharp jump in the share of this buyer group getting in with reduced equity levels (say 37% for example) – buyers that were previously locked out.
Indeed, the RBNZ figures show that nearly 18% of investor loans in June were done with a deposit between 35% and 40%, up from just 0.3% in May (when the old deposit requirement still prevailed), and the highest share since late 2019.
3. We’re probably out of recession, for now
Last week’s NZ Activity Index from Stats NZ showed a rise in the year to June of 0.8%, for an average over April-June of the same figure. When you map that NZAC average onto what it might mean for GDP you get a potential quarterly expansion in the economy of around 0.3%-0.5% in Q2 2023. The actual GDP result won’t be confirmed by Stats NZ until 21st September, but for now, it’s looking relatively likely that the (minor) recession over late 2022 and early 2023 has come to an end.
Of course, there are still plenty of fears that a new economic downturn could emerge later in 2023 (as the lagged effects of previous monetary policy tightening fully flow through to household spending), which is a reason for caution about our labour market prospects and the degree to which house prices might rise over the next 6-12 months. Certainly, I’m not expecting much of a bounce-back in prices in the short term.
CoreLogic chief economist Kelvin Davidson: "More moving could reflect some households looking to upsize and get that bigger/flasher property." Photo / Peter Meecham
4. Has the unemployment rate started to rise?
Easily the most important data release coming up is Stats NZ’s official labour market figures on Wednesday this week. The importance of it stems in large part from the fact that “maximum sustainable employment” is part of the Reserve Bank’s dual mandate for monetary policy. Timely indicators suggest that employment has continued to rise in recent months, but also that the labour force has probably got bigger too (on the back of net migration).
And it’s the balance of those two things which will determine the unemployment rate. Even if it has risen a bit in Q2, it’s important to note that it’s starting from a very low level (3.4%) – so this next labour market release may not do much to calm any lingering fears that the official cash rate might need to be raised again at some stage later in the year, but it may not cause any fresh anxiety either.
5. Foreign buyers still not an issue
And just a final aside, last week’s Stats NZ figures showed that people without citizenship/residency accounted for 0.4% of property purchases in Q2 and 0.8% of sales – for a net figure of -0.4% (i.e. they were net sellers). These figures were relatively low prior to October 2018’s Foreign Buyer Ban and they’ve been even lower since that date. In other words, foreign buyers are just not an issue.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
