ANALYSIS: Each month I conduct five surveys which deliver up-to-the-minute insights into what is happening in the economy overall and in the housing market in particular. One of those surveys focusses on people’s general plans for buying more or less “stuff” in the coming 3-6 months. The insights can be useful for retailers, home-renovation firms etc. They’re especially relevant at the moment because the people running such businesses are waiting for the impact of falling interest rates to begin feeding through.
Five months ago, a record net 42% of my near-700 respondents said that they planned on buying fewer things over the remainder of the year. Since then things have improved and my latest survey shows that as many people now plan spending more as plan spending less – so the result is a net 0%.
This is the best reading since December 2021 and there are two areas in particular which stick out. First, a net 13% of people have just reported that they plan spending more on home renovations. This is above the average reading for this measure of 9% and well away from the net 11% in June who said they planned spending less.
The result is an important one because as anyone who has undertaken the exercise knows, renovating is an expensive business and there’s a high risk of things going wrong. People tend only to contemplate getting the job done when they are feeling secure in their employment and perhaps have some back-up cash ready if costs should blowout.
Start your property search
Discover more:
- Neighbours on NZ's record-breaking street team up to sell their mansions
- Six reasons why I've pulled forward my plans to buy a house
- Mum and dad build epic 36m, glow-in-the-dark waterslide in their backyard
I read this result as saying there is solidity to the improvement in consumer sentiment and buying plans which my survey is picking up.
The second significant result is the easing to just a net 11% of people planning to cut back (yes, still reduce) spending on eating out compared with a net 44% in May. The change is large, and the chances are good that this reading will soon turn positive. But the fact that it remains negative suggests we should expect to see additional closures of eating and drinking establishments as we start heading through summer.
Other results include a net 10% of people still planning to cut their purchasing of new vehicles. Back in May this reading was -16% so unlike eating out and renovating one’s home the improvement is minimal. For car yards, prospects still don’t look good.
For international travel, a net 10% of people plan doing more compared with a mid-year low of around a net 3% planning not to go offshore. For domestic travel the improvement is a much greater one to net 9% positive intentions compared with a net 17% of people planning less local travel in the middle of the year.
Independent economist Tony Alexander: "Renovating is an expensive business and there's a high risk of things going wrong." Photo / Fiona Goodall
This bespeaks of good demand for places in camping grounds and holiday town motels this summer.
I gather a couple of readings relevant to the housing market to which I assign less significance than the numbers I get from my surveys of mortgage brokers and especially real estate agents. But for what they are worth they back up the comment I’ve made recently that although buyer demand has lifted and continues to grow, there is no semblance of a frenzy in play – especially as vendor growth is also good.
A net 7% of people say they don’t contemplate buying an investment property compared with a net 19% in June. Things are less negative but only just exactly equal to the average reading for this particular measure.
Finally, a net 4% of people plan cutting potential purchasing of a house to live in compared with 10% in June. There is improvement but the average is -2% so again we cannot say that the rise in demand clearly evident in a wide range of data is anything approaching a boom. The housing upturn remains contained.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
