ANALYSIS: There was some commentary in the media the other day regarding a wave of vendors being set to hit the housing market at some stage and this would act as a cap on house prices. There certainly will be a great number of people who have held off from selling because they don’t want to face disinterest from buyers and commit to paying real estate agent advertising fees and endure some disruption to their lives without high certainty of achieving a sale at a reasonable price.
However, history tells us that when sales start to pick up and there is a lift in the number of properties being freshly placed on the market, these new vendors are outnumbered by the new buyers and the stock of listings goes down.
Already the number of properties listed for sale in New Zealand has fallen over 14% in the six months to the end of June. It’s true that the stock of listings nationwide at 24,700 is well above the low near 13,500 of mid-2021. But this number is still 29% below the average stock on sale since the start of 2007. It is also not atrociously higher than the 20,000 stock available at the start of 2020 just before the pandemic struck and then the buying frenzy occurred.
For first home buyers the opportunity still exists to make a purchase from a reasonable range of potentially suitable properties. But a year from now, and especially after that, the prospects for being able to pick and choose amongst listings look a lot slimmer.
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In Auckland the end of June stock was 9,200 dwellings to pick from, a 13% fall from six months ago, and the same 24% increase from early-2020 levels as for the rest of the country overall. But Auckland’s listings are only 6% below the average since 2007 versus 38% elsewhere. This difference will reflect two things.
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First, closure of the borders for two years has resulted in a fall in Auckland’s population. Second, there has been a construction boom in Auckland. But the migration boom will bring proportionately more immigrants to Auckland than to the rest of the country and the currently plentiful supply of new townhouses may be soaked up quickly while the dearth of finance for new multi-unit complexes will see supply growth tail off for the next 2-3 years.
On another topic, while there has been some attention this week on some banks newly lifting their fixed mortgage rates because of higher inflation worries and interest rates offshore, those pricing problems here are easing off. The ANZ’s monthly Business Outlook Survey has shown a decline in the proportion of businesses planning to raise their selling prices in the next 12 months to 49% from 62% at the start of the year.
Independent economist Tony Alexander: “The migration boom will bring proportionately more immigrants to Auckland than to the rest of the country.” Photo / Fiona Goodall
Their survey of consumers with Roy Morgan has also shown a decline in year ahead inflation expectations to 4.3% from 4.8% a month ago and a peak of 5.4% in March.
The NZIER’s Quarterly Survey of Business Opinion has also just shown a significant easing of difficulties for businesses in sourcing both skilled and unskilled labour to below average levels and that bodes well for wage rise restraint. These are the sort of things which will make the Reserve Bank confident that their call to not raise the cash rate from 5.5% is the correct one.
Things are on track for monetary policy to ease next year and as mortgage rate falls start to activate the buyers who have been sitting on their hands for two and a half years to date, the upside housing market pressures could surprise quite a few people.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
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