1. Credit Contracts and Consumer Finance Act (CCCFA) softened
Last week David Clark announced a softening of the CCCFA rules, to allow more otherwise credit-worthy borrowers to actually get a mortgage. Most notably, banks will be able to make a presumption that borrowers will change their spending behaviour after they get a loan in order to keep servicing the debt, rather than necessarily having to get their affairs 100% in order prior to applying. This will clearly help ease some of the current pressure on the housing market, but not all – we’ve still got higher mortgage rates and tighter deposit requirements.
2. First home buyers are feeling the heat
One key group that has been suffering from tighter credit availability – including the reduced speed limit for low deposit loans and of course the (previously) restrictive CCCFA rules – are first home buyers. An initial overview of the numbers from Our Buyer Classification series shows that their share of purchases has begun to slide, from 26% in late 2021 to 23% now (and that’s within a quieter overall market in terms of the number of transactions too). January's number was 24%. To be fair, those first home buyers that have cleared these hurdles are probably picking up some bargains. But you’ve got to get the money first.
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3. Higher net migration (if it occurs) won’t stop the housing slowdown
Stats NZ is due to update us on the latest net migration figures, and I’m often asked if a reopened border will give the housing market another kick-start as Kiwis return home and other new residents arrive. Honestly, I’m very cautious of that view. First, don’t forget that many current New Zealand residents will leave for elsewhere, maybe higher pay in Australia, or their OE further afield. Second, the experience of the past year (when house prices soared even as net migration stayed low) suggests that other factors matter more anyway, such as mortgage rates and credit availability.
Corelogic chief economist Kelvin Davidson: "We’ve still got higher mortgage rates and tighter deposit requirements." Photo / Peter Meecham
4. Don’t put too much weight on this week’s GDP figures
On Thursday morning, Stats NZ will publish the official data on New Zealand’s economic performance in the final three months of 2021. It’ll probably be a decent number, showing that the economy was ticking over fairly well at the end of last year. However, it’s now almost three months out of date, omicron has hit hard so far this year, and indeed timely measures such as business and consumer confidence have weakened considerably. So as always, take note of the GDP data, but put more weight on what’s happening right now – which unfortunately seems to be signs of softer economic activity at the same time as inflation pressures remain intense.
5. Women and Property Report highlights gender wealth gap
CoreLogic annual Women & Property Report showed that women generally own less property than males, and significantly fewer rental investments – at least partly due to the gender income gap. To be fair, female ownership of smaller dwellings (e.g. flats, apartments) is higher than male, but this segment is a relatively low share of the overall housing stock. The key message is that the recent housing boom will have worsened wealth equality, as higher male property ownership has seen their financial position increase faster.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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