ANALYSIS: Since December last year the number of properties which buyers can peruse has fallen 15%.
In Auckland stock levels have fallen 20% from the peak in August last year. In Wellington stocks are down 49% from the same month while in Canterbury the decline is 11% from the peak in March. These falls don’t mean that buyers are struggling to find something to purchase as the average nationwide level of stock for the past five years has been almost 22,000 – below the end of July 2023 number of around 24,000. Auckland’s five year average is 8600, below the end of July number of 9000.
There has also been a lift in the net proportion of real estate agents in my monthly survey saying that they are receiving more requests from potential vendors for appraisals – to 33% from just 13% in late-June. But the good jobs growth recently and only small rise in the unemployment rate to 3.6% suggests that very few property owners are likely to be feeling that they have to sell and downsize or go renting for a while. But there will be some and this suggests that these people alongside those who have waited for the market to stabilise before looking to sell will be stepping forward over the remainder of this year.
But history tells us something about what happens when our real estate market picks up. More buyers step forward than sellers. The relevance is that maybe not so much this year but instead through 2024, stocks of listings around the country are likely to fall at a rate which may surprise many people. This will become one of the factors causing an acceleration in the pace of price gains next year.
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As for prices in the near future, I wouldn’t be surprised to see one or two more months of falls before the year is out. That is what can happen when an asset price cycle turns. It is also the case that a lot of people wanting to buy simply cannot get the finance when banks are applying test mortgage rates close to 9%.
That then is where monetary policy becomes very relevant. At some stage the Reserve Bank is going to feel that inflation risks have shifted enough to allow them to send a firm signal that a cut in interest rates is just around the corner. When they do a lot of frustrated buyers will start stepping forward.
But we are nowhere near that point yet and the next monetary policy review coming up on August 16 is unlikely to contain anything immediately positive for borrowers.
Independent economist Tony Alexander: “August 16 is unlikely to contain anything immediately positive for borrowers.” Photo / Fiona Goodall
Falling interest rates are best viewed as something coming in 2024 – but whether these falls get underway early or late in the year is essentially anyone’s guess still because there remains extreme uncertainty about the many factors which affect inflation. And it pays to note that there is little basis currently for believing that when rates fall the declines will be especially large.
Around the world there are signs that inflation is not going to settle as comfortably back near 2% as was the case before the 2008-09 Global Financial Crisis, and worries about deflation of 2019 seem near impossible to envisage. That is why not everyone is fixing their mortgage rates for just one year or even two. Some borrowers are going longer, willing to bet that the likes of climate-induced inflation and tight labour markets keep inflation and therefore interest rates relatively elevated for the next few years.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
