1. Can we build it? Yes we can
In recent years, smaller dwellings such as townhouses have typically accounted for 50-60% of all new building consents across the country, a far cry from the post-GFC figures of less than 20% over 2010-13. But in fact, that sharp upswing in the rate of construction for this more intensified type of dwelling was actually to a large extent an Auckland boom (stemming from the Unitary Plan) – with new CoreLogic figures showing that of the total change of about 39,600 in the number of flats/townhouses across NZ since 2016, nearly 25,000 have been in Auckland, or about 63% of the growth. In turn, about one-third of Auckland’s overall rise in townhouse stock has been in Waitakere (e.g. Hobsonville), with about one-quarter in Manukau, and 20% in Auckland City.
In bigger picture terms, it’s a great example of what friendlier planning laws can achieve, with townhouses (and more dwellings in general) providing a different and cheaper option for a wider range of property buyers. Here’s hoping that the Government’s current, strong push on housing supply rules will have the same effect in the coming years.
2. No moves on higher LVR lending yet
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Given we already knew that sales volumes were low in June, it wasn’t any surprise to see gross new mortgage lending flows (house purchase, bank switches, loan top-ups) dipped $0.1 billion year-on-year. The weakness reflected a drop in lending to owner-occupiers rather than investors, although investors were hardly through the roof either. There was also no evidence that banks/borrowers acted early on higher loan-to-value ratio (LVR) lending in June (given they knew looser rules were coming from July 1). Indeed, the share of owner-occupier lending going out at <20 deposit held steady at 10%, well below the prevailing 15% speed limit, not to mention the new rule of 20%. Of course, this probably just reflects the ongoing restraint of high mortgage rates.
3. Consumers see the light?
ANZ’s overall consumer confidence measure rose fairly sharply in July, although the total itself is still low. The increase was driven more by the forward-looking components of the survey rather than the mood on the ground right now. In other words, it’s not great at present, but households can see better times ahead. That’s likely to reflect the now-widespread expectation that the Official Cash Rate will have started to drop before the end of the year, with some mortgage rates already falling. Adding to the good news on that front, the inflation expectations measure from ANZ’s consumer confidence survey fell further in July and is now back to its lowest level since September 2020.
CoreLogic chief economist Kelvin Davidson: "It’s not great at present, but households can see better times ahead." Photo / Peter Meecham
4. Filled jobs start to fall?
Later today, Stats NZ will publish the filled jobs data for June. These employment figures have really flattened off in the past few months (after a period of sustained growth), and given the obvious struggles for many firms at present, it wouldn’t be too much of a surprise to see a small drop in filled jobs in June’s data. The cooling labour market is certainly another reason to be pretty cautious about the prospects for property.
5. Keeping an eye on ‘bad debt’
On Wednesday, we’ll get the Reserve Bank’s June data on the stock of mortgages. There are many different breakdowns to look at, but one key aspect of this monthly dataset is the amount of non-performing housing debt sitting on the banks’ balance sheets. So far, loan repayment problems have remained very low, but it’s important to keep an eye on this measure, given that job losses have started but markedly lower mortgage rates haven’t arrived just yet.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
