1. Mortgage lending up, slowly
New mortgage figures show there was $3.4 billion of new lending in January, up $600 million year-on-year, and the sixth monthly rise in a row. But the figures remain quite low – in January 2021 there was $6.4bn of lending – highlighting that the housing market is recovering, but not particularly quickly. First-home buyers continue to make full use of the loan to value ratio speed limits to buy property, recently accounting for 80% of all low-deposit owner-occupier. New builds, exempt from the LVRs (and probably debt-to-income ratios), are certainly one key target for first-home buyers at present.
2. No OCR change … for now
What does the Reserve Bank’s decision to keep the OCR at 5.5% mean for the market? Not much has changed in the Reserve Bank’s tone or forecasts, but it’s still talking tough, and has little tolerance for any upside inflation surprises over the coming months. Indeed, there’s still a chance the OCR could rise further at a later date, and perhaps more importantly, cuts might not be seen until we approach the middle of next year. So the message for mortgage rates remains the same – “higher for longer”, with material falls not perhaps on the cards for about another year.
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3. Property values just ticking along
Of course, in the current environment where mortgage rates remain a key challenge, it’s no surprise to see lending volumes, house sales activity, and property values all remain a bit variable. Indeed, the CoreLogic House Price Index showed another subdued result in February (0.3% monthly rise), after a similarly softer figure in January (0.4%). Note that in the final two months of last year, the growth was 0.7% and 1.0%. This inconsistent/patchy dataflow backs up my view that 2024 will continue to see an underwhelming upturn in the property market.
CoreLogic chief economist Kelvin Davidson: "There’s still a chance the OCR could rise further at a later date." Photo / Peter Meecham
4. Recent economic news: the good, the bad, and the neutral
Last week’s economic data was certainly “up and down”; filled jobs increased in January (good); ANZ’s sentiment measures for February across both households and firms were neither here nor there (neutral); and new dwelling approvals fell pretty sharply again in January (bad). The housing market implications of this are probably also fairly neutral for now, but the longer the downturn in dwelling approvals continues (at a time of high population growth), the greater are the chances that housing shortages come back into the public consciousness.
5. Hope rather than expectation?
And finally, Housing Minister Chris Bishop outlined more plans last week around new housing supply, including the requirement for councils to zone enough land for 30 years of building growth, while the Government also plans to look seriously at infrastructure, the rental market, construction costs, and the RMA. Councils will have the right to opt out of medium-density planning rules, provided that there’s enough land somewhere else to provide the right type of housing for future population growth.
It all sounds great in principle, and of course we’re going to need a lot more physical houses in future, of the right type/size, in the right place, and with appropriate infrastructure. But several governments have also tried to fix this issue in the past, without too much success. So I guess it’s just a case of wait and see, with fingers crossed that finally somebody can do better than the past.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
