1. Budget 2022 probably a non-event for housing
At 2pm on Thursday Finance Minister Grant Robertson will deliver the Budget. It’s likely his speech will focus on climate change and health, but there’s a possibility he’ll include some minor housing-related measures, too. On that note, the Government announced extra funding for trade apprenticeships, which will certainly be welcomed by the construction industry, but the extra money won’t change the capacity/cost game overnight given that training takes time.
2. First home buyers’ market share low
The latest CoreLogic Buyer Classification series showed a reasonably stable picture for various buyer groups in April in terms of market share but the overall number of deals continues to weaken. Don’t confuse “stability” with “encouraging”, though. First home buyers share of purchases edged up from 21% in March to 22% in April, but that’s still well down on the typical figure of 26% in the second half of last year, with tight deposit rules and stringent checking of expenses still clearly hindering some would-be buyers.
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3. Border fully reopens on July 31 – but will it have an effect on house prices?
Last week, the Government announced that it would fully open New Zealand to the world from 11.59pm on July 31, two months earlier than had been planned. The re-opening of the border will help the tourism sector, overall employment, and the housing market. But the full effects will only be known in time, and are unlikely to materially change the downbeat property outlook anyway, given that the mortgage environment has already tightened.
The Government also announced changes to its immigration policy in a bid to attract more highly skilled workers. No doubt building firms will be looking forward to recruiting a few more skilled overseas workers. But once again, let’s not forget that many current residents will be looking to leave, so the overall net effect may not be especially significant.
To be fair, at least March’s net migration figures were a bit stronger, as people reacted to looser border rules. We had a net gain of about 1000 NZ citizens in March, after three months of net losses. However, as things settle down on the border front, we may see that March’s stronger figure was only a blip in an otherwise concerning “brain drain” trend.
CoreLogic chief economist Kelvin Davidson: “Don’t confuse ‘stability’ with ‘encouraging’.” Photo / Peter Meecham
4. Landlords still appear to have pricing power
Last week’s rental figures from Stats NZ showed an annual rise of 6.9% in April, with the re-acceleration in these figures from February’s 4.6% “lull”, confirming that tenants are still under pressure and that landlords are trying to recoup higher mortgage and tax costs wherever possible. The speed of rental growth will have to slow sometime (as tenants hit affordability limits), but for now, landlords still seem to have pricing power.
5. Debt to income rules delayed, but Wednesday’s data still intriguing
At 3pm on Wednesday the Reserve Bank will release data on debt to income ratios for mortgage lending over January to March this year. Of course, any formal caps have been postponed by the RBNZ until mid-2023, if required. But we know some (if not most) banks have been self-regulating in recent months, so any effects in the data will be interesting to see. Certainly, in the last few months of 2021, it was investors who borrowed at high DTIs by far the most often – more than 50% of loans (DTI >6), versus less than 10% for first home buyers (DTI >7). On that basis, investors will no doubt be quite relieved that formal rules have been pushed out into next year at the earliest.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
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