1. Credit conditions tighter again
As expected, the flow of mortgage lending was subdued again last month, with the value down by 29% from June last year, and the number of loans even worse (-43%). Investor lending remained soft, but if anything, owner-occupiers were the weakest in June. In turn, that reflected an easing for first home buyers on the back of tighter loan-to-value ratio (LVR) policies at the banks again. Indeed, after rising to 7.7% in May (not far off the 10% speed limit), the share of owner-occupier loans done at a low deposit, or high LVR, was 6% in June. No surprise, given the ongoing pause on this type of lending at some/most of the major banks.
2. Filled jobs are still growing …
Last week’s Stats NZ figures showed another rise in filled jobs in June, with the 0.6% increase being the third in a row, after a wobble in the first few months of the year. In terms of preventing a serious crash in the housing market (which could destabilise our sound financial system), the continued strength of the labour market is a key factor – both in terms of the number of jobs but also the increases in wages.
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3. … but there’s more pessimism from businesses
However, it remains to be seen how long the labour market can stay this robust in light of the weakness of business confidence (especially for house-builders). The latest ANZ survey showed that sentiment amongst firms remains weak and – although there’s sometimes a difference between what people say and what they actually do – there’s still a lingering risk here that new hiring gets scaled back and perhaps even jobs start to be cut. There aren’t any signs of it yet, but one to watch.
CoreLogic chief economist Kelvin Davidson: “Investor lending remained soft, but if anything, owner-occupiers were the weakest in June.” Photo / Peter Meecham
4. Big day on Wednesday: Q2 unemployment
Ultimately the benchmark measure of labour market health is the official unemployment rate, to be published for Q2 by Stats NZ on Wednesday. Over the latter stages of 2021 and into 2022, unemployment has held at a record low of 3.2%, and there’s every chance that it’ll be reported to have dropped even further in Q2, maybe below 3%. That would tend to keep some kind of foundation under the property market, although with buyers now in the ascendency, the direction of travel for prices is still likely to remain downwards for a while yet.
5. Construction remains a key focus area
This week Stats NZ will also publish June’s new dwelling consents data, and there’s got to be a significant chance that they’ll weaken from May’s resilient result. After all, the ANZ survey showed house-builder confidence is low, presumably due to weaker expectations for new customers signing on for a project – in turn, that’s hardly surprising, given the sharp increases in costs and also higher mortgage rates. Eventually, this will show up in the new dwelling consent figures, if not this month, likely over the next few. To be fair, the pipeline of consents already approved should keep builders busy for a while yet, albeit some of those consents may never be acted on.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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