1. It’s all about the economy
Undoubtedly Thursday is a key day in the news calendar, with Stats NZ publishing the figures on overall economic performance for the second quarter of the year. Most commentators expect a technical recession to have been avoided, with GDP expanding a touch in Q2 (after Q1’s fall). However, as always, these GDP figures are quite old; we’re already into mid-September, and technicalities aside, it probably still feels recessionary for many households at present – given the high cost of living. Of course, on the plus side, unemployment is low, and other indicators suggest that the economy has continued to tick along so far in Q3. On the whole, I wouldn’t expect the GDP data this week to have too many direct implications for the property market – although if anything, “bad news” for GDP could be good for property if it caps any further scope for mortgage rate rises.
2. First home buyers steadily working way back in to the market
With the market continuing to fall, a common question of would-be-buyers is whether to wait to buy, on the promise of a cheaper price later down the line. There is the consideration of the cost of increasing interest rates counteracting falling prices, however recent analysis showed the financials favoured waiting in a falling market like we’re in. But for first home buyers, it’s not all about the purchase price, with emotions also playing a part when putting a roof over their head. The latest CoreLogic Buyer Classification appears to prove that to be the case with their share of purchases (in an admittedly quieter market) increasing in August to 24.9%, from 22.8% in July and a recent low of 21.7% back in March 2022.
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3. Trading up is getting a little easier …. in some areas
Last week we published some research on the gap in value between three and four bedroom properties – a proxy for the “trade-up premium”. The first thing to note is that it’s still quite a big financial hurdle to move to a property with more bedrooms in most parts of the country – at least $154,000 (Dunedin) across the main centres. However, the trade-up premium has started to drop in some places, such as Auckland City, Waitakere, Manukau, Wellington City, and Dunedin. As we’ve been highlighting for a while now, a wider downturn can sometimes be a good time to try and climb the ladder. After all, that ‘next’ property may have lost a bit more value than your own.
CoreLogic chief economist Kelvin Davidson: “It probably still feels recessionary for many households.” Photo / Peter Meecham
4. Net migration likely to remain negative
This week Stats NZ will publish the July migration figures and it seems inevitable that departures will have continued to outweigh arrivals (note that the net balance for the year to June was -11,477). There are arguably bigger factors at play in the housing market at present than net migration – such as higher mortgage rates. But all else equal, net outflows of people will be undermining property demand to some extent, and there are certainly signs of that in the rental sector ….
5. Rental growth slowed further in August?
Indeed, rental growth has recently cooled from an annual pace of 6.9% in April to 4.0% in July, and it seems fairly likely that this figure could have slowed again in August (data due from Stats NZ Tuesday morning). Rental listings have risen in recent months and, as noted, negative net migration flows are probably adding to the shift in power towards tenants.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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