1. Value weakness is now emerging in several suburbs
Data released last week by CoreLogic confirmed that many suburbs have seen drops in their median property value. Indeed, the falls since November have been at least 1% in roughly 150 suburbs across NZ (or approximately one in every six suburbs). These falls are most evident in Auckland, Hamilton, Wellington, Lower Hutt and Dunedin (suburbs in Tauranga and Christchurch have held up better). This patchiness is to be expected as buyers and sellers take time to settle on the new normal, and the labour market is likely to hold the key as to whether we see a soft landing or a more significant downturn.
2. We’re still watching filled jobs closely
On that front, data due this week from Stats NZ will help to shed more light on the labour market situation. The number of filled jobs continued to rise in January, and the next set of data will probably show that there was further growth in February too. But the pace of increase could well have slowed, and with business confidence in the doldrums, there is certainly a risk of some job losses starting to be seen this year.
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3. But could confidence at least start to improve a bit?
That said, we’ve now seen the easing of the Covid restrictions, with outdoor gatherings loosened up, and mandates/passports soon to be scrapped. The return of tourism in the near future will also be a shot in the arm (excuse the phrase) for the hospitality sector and wider business community, and the overall economy. As such, while it might be too late for the ANZ’s next business confidence reading, which is also due this week, it wouldn’t be too much of a surprise to see sentiment start to perk up from next month. In turn, that would help to lighten some negative moods around the housing market – although we’ve also got to watch ANZ’s consumer confidence measure, which is also due this week, and has been even more downbeat than the business equivalent.
CoreLogic chief economist Kelvin Davidson: “there is certainly a risk of job losses.” Photo / Peter Meecham
4. Mortgage lending was sluggish again in February
Last week’s Reserve Bank data showed $5.7bn of gross new mortgage lending in February, covering loans for house purchase, but also things like top-ups and bank switches. That was $1.9bn lower than a year ago, the sixth fall in a row, and the sharpest of those six declines. The evidence that low-deposit first home buyers are battling hard is clear. Banks advanced only 3.4% of loans to owner occupiers at low deposit (or high LVR), despite the cap being up at 10%, and only about one in give first home buyers got a low deposit mortgage (just four months ago that was two in five). CoreLogic’s own Buyer Classification data released at the start of the month had already hinted at a soft month for first home buyer lending in February.
5. If we’re not already at the dwelling consent peak, it’s not far away
Finally for this week, Stats NZ will also publish dwelling consent figures for February. We all know the record size of the building boom that’s been underway over the past year or two, but January’s data showed hints of a turning point for consent volumes, and I wouldn’t rule out another softer result for February – especially given that construction costs must be getting prohibitive for some households to go down the new-build path. The consensus is that builders themselves have hit capacity limits too. Of course, even if consents do tail off quickly, the pipeline already approved will keep builders busy for a while yet, and sustain the flow of new housing into our overall stock.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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