Foreign buyers, what foreign buyers?

1. Surprise growth in January

The CoreLogic House Price Index showed that average property values were up by another 2.1% in January (leaving the annual change 27.5%), a bit faster than December’s monthly rise of 1.9%. That’s despite several challenges facing the market, including poor affordability, higher mortgage rates and tighter credit conditions. However, with sales activity now looking more certain to have passed the peak, history tells us that value growth should slow more notably within the next few months.

2. The job market is still very buoyant

The unemployment rate dropped to a new record low of 3.2% in Q4 2021, basically a level where most economists would consider that basically anybody who genuinely wants a job now pretty much has one. Without inwards migration, many industries are finding it almost impossible to hire the required staff, so further employment growth may be capped by lack of supply rather than lack of demand. To be fair, this hasn’t translated (yet) into a wage spike, but low unemployment itself is still clearly a solid support for the property market.

3. Foreign buyers, what foreign buyers?

The latest figures on buying (and selling) of NZ residential property by people without citizenship or residency showed that activity remained trivial in Q4 2021. Figures noted. Let’s quickly move on.

4. Record number of consents for new homes

New dwelling consents hit another fresh record high in the year to December 2021, of 48,899. Pretty close to half of those have been smaller dwellings, such as townhouses – and in Auckland, it’s two-thirds. A more intensified housing stock makes a lot of sense. However, with construction cost growth very high, there’s surely a chance that more households will be turned off going down the new-build path this year and that consents will ease. Of course, with plenty of approved work still in the pipeline, that may not concern builders too much.

CoreLogic chief economist Kelvin Davidson: "Low unemployment is clearly a solid support for the property market." Photo / Peter Meecham

5. Who’s buying?

Our data looking at market shares for the various buyer groups in January (due late this week) could help shed more light on the impact of the CCCFA, but again it’ll be hard to be definitive about whether the new rules are affecting one group over another. After all, January is always a quieter month and therefore conclusions from a smaller sample need to be moderated. Moreover, CCCFA isn’t the only game in town – tighter loan to value ratio rules for owner occupiers are surely playing a key role too. We’ll report when the data is available.

- Kelvin Davidson is chief economist at property insights firm CoreLogic

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