1. Auckland and Queenstown dominate the upper end
We recently took a detailed look at New Zealand’s $1 million housing markets. It’ll come as no surprise that houses in Auckland and Queenstown feature heavily. More than half of recent sales in the $1m-plus price bracket were in Auckland while Queenstown accounted for around 4% of $1m-plus sales – punching well above its weight, given that it only has 0.6% of all dwelling stock across New Zealand.
Around 28% of suburbs nationwide have a median value of $1m or more. Around half of those are in Auckland. The usual suspects of Herne Bay ($3.37m), Saint Marys Bay ($2.75m), Westmere ($2.49m), and Remuera ($2.49m) are of course in that group, but so too are suburbs that many had previously considered as affordable, including Onehunga ($1.06m), Mangere Bridge ($1.17m) and Point England ($1.08m).
However, when it comes to share of $1m-plus suburbs, Queenstown pips Auckland, with nearly nine in every 10 suburbs in the wealthy enclave boasting a median property value of at least seven figures.
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To be fair, the rise in nominal property values over time means that the $1m-plus barrier doesn’t mean as much as it did in the past. That said, it’s still a useful threshold to look at, and it’s another way of showing just how stretched housing affordability really is for the average household in many of our key urban markets. To that end, the new debt to income ratio caps for mortgage lending will have an important role to play in providing some sort of restraint for house prices over the medium to long-term. But ultimately it’s about getting a higher physical supply of property in relation to demand, and on that front, it’s certainly been encouraging to see the Government pushing hard – with measures such as forcing councils to designate enough land for 30 years of development.
2. Banks slowly getting busier
Speaking of mortgage lending, the $6.2 billion of new activity (house purchases, bank switches, top-ups) in August was $400m higher than the same month last year, which continued the gradual upwards trend. Interest-only lending remains under control, but there’s a continued drift higher for low-deposit lending, off the back of the easing in the LVR rules from July 1. First-home buyers are key beneficiaries of that, absorbing 80% of all low-deposit lending to owner-occupiers in August, with 43% of first-home buyers taking out a low-deposit loan.
CoreLogic chief economist Kelvin Davidson: "The $1m-plus barrier doesn’t mean as much as it did in the past." Photo / Peter Meecham
3. Economy still looks pretty weak
But even though mortgage lending is growing again, there remain reasons for caution about the housing market’s near-term prospects. For example, last week’s NZ Activity Index (NZAC) for August showed a drop of 0.5% from the same month last year, which is the second fall in the past three months. After Q2’s small drop in GDP, the NZAC is suggesting there’s a chance of another drop in Q3. That suggests caution about the labour market and also house sales and prices.
4. Watch filled jobs data this week
On that note, Stats NZ will publish the August filled jobs data later today. A drop in jobs wouldn’t be a surprise, backing up the cautious outlook for the housing market.
5. Will dwelling consents bottom out soon?
I’ll also be watching out for the new dwelling consents figures for August from Stats NZ on Tuesday. There’s no doubt that the construction sector is weak at present, but there have just been some tentative hints lately that the trough might be approaching – at least for dwelling approvals (the bottom for actual workloads will take longer). One to keep a close eye on.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
