1. All eyes on CPI
And finally, the key data release by a country mile this week is Q4 inflation from Stats NZ on Wednesday. The Reserve Bank has forecast that consumers price inflation (CPI) will be an annual rate of 5% in Q4’s numbers (down from 5.6% in Q3), so any result higher than 5% would present a risk that the Official Cash Rate might need to rise again – especially if it reflected non-tradable/domestic pressures such as rents.
Equally, anything less than 5% would calm the nerves about another OCR rise. My own hunch is that it’ll be a bit less than 5%, but the recent global issues around conflict and higher shipping costs are a clear concern. Watch closely on Wednesday!
Start your property search
2. Rental market is still favouring landlords
Stats NZ’s figures last week showed that rents on the flow/new tenancy measure were 7% higher in December than a year ago, accelerating again after a couple of slightly slower months. With net migration (and hence property demand) high and the supply of rental properties relatively tight, this combination is pushing up rents – good for landlords, not for tenants. Admittedly, rents are already quite high in relation to household incomes, so the growth may have its limits. But for now, it does seem that rents will continue to rise in the short term.
3. First-home buyers are still enjoying conditions
New figures show first-home buyers’ share of property purchases is still high, with the latest CoreLogic Buyer Classification report registering a 27% share in December and across Q4 as a whole (and Q3 too). The number of deals is on the rise as well. Those market share figures are record highs, driven by many factors, including access to KiwiSaver for at least some of the deposit, a willingness to compromise on property type/location, making full use of the low deposit lending allowances at the banks, and reduced competition from other buyer groups.
Indeed, given high deposit requirements, low gross rental yields, elevated mortgage rates, and less favourable deductibility/bright-line tax settings (for now), mortgaged multiple property owners – including investors – are still only accounting for about 21-22% of activity. Clearly, that’s not a complete abandonment of the market; some investors are still getting the sums to work. But that market share figure is nevertheless below the norm of 25-26% for mortgaged MPOs and well down on the most recent cyclical peak of 28% in Q1 2021.
CoreLogic chief economist Kelvin Davidson: "It does seem that rents will continue to rise in the short term." Photo / Peter Meecham
4. Property values up in December
Despite their continued strength in recent months, some would-be first home buyers may not be quite so pleased about the growth now being seen for property values. The CoreLogic House Price Index rose by 1% in December, pushed along by Auckland, Tauranga, and Christchurch, although a bit patchier in some other areas such as Gisborne and Napier. With mortgage rates still high, our expectation remains that 2024 will see only a slow recovery by past standards, with prices variable from month to month, and from region to region.
5. Sales activity up, but from a low base
Part of that general sluggishness for property values could reflect a relatively subdued housing market in terms of sales volumes, which are still low, albeit rising. Our data for December showed that volumes across both agent-led and private sales were up by nearly 30% from the same month last year, but still about 25% lower than normal. In other words, more deals are starting to happen, but they’re nowhere near back to regular volumes yet.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
