House sales volumes plummet nationally and in Auckland
The Real Estate Institute of New Zealand (REINZ) has reported a big drop in house sales in January, which it said mortgage agents have linked to credit law changes.
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January's national house sales volumes fell 48% from December’s 7,080 to 3,665, while Auckland’s dropped 45% to 1,323 from 2,411, which the institute said was “weaker than a typical first month of the year.”
Northland, Canterbury, and West Coast sales fell to their lowest levels since 1992, declining 36% in the first two areas and 55% on the coast, REINZ reported. Meanwhile, listing numbers fell 1.7% nationally.
“Many agents point to access to finance, exacerbated by changes introduced in December to the Credit Contracts and Consumer Finance Act, currently under review,” Jen Baird, REINZ chief executive, told NZ Herald. “Hard evidence is lacking.”
Baird said a recent survey by Tony Alexander with REINZ found that it was financing, and not the availability of homes for sale, that was the predominant concern for buyers. She also cited data from credit reporting agency Centrix which found that home loan applications approved dropped from 39% in October to 30% after December.
The REINZ CEO expects February and March sales numbers to recover, “but this does depend on reasonable levels of new listings.”
On falling prices, Baird said: “While we do note a deceleration in the rate of price growth, it does follow a particularly strong year. Historically low interest rates and a supply deficit saw heightened demand and kept house prices rising through 2021. However, with the Reserve Bank increasing interest rates, inflation rates being at their highest in 30 years, tighter lending conditions, and government regulation, market dynamics are shifting.”
The house price index, which measures the changing value of residential property nationwide, showed an annual increase of 19.9% from 3,474 in January 2021 to 4,164 – a 1.5% decrease from December and a 2.6% drop from its peak in November.
The index for New Zealand excluding Auckland showed an annual increase in house values of 20.8% from 3,509 to 4,239, down 0.8 % month on month.
Not all data showed drops, however.
Annual price growth has been posted for all regions – and most was double-digit. Only Nelson and Southland saw annual growth of less than 10%, at 7.4% and 9.7%, respectively.
Wellington house sales rose 9% annually, Marlborough's were up 7.7%, and Hawkes' Bay rose 2.5%.
Northland saw prices increase from $625,000 in January 2021 to $810,000 last month. Bay of Plenty prices rose 22.8% from $767,000 to $942,000 which was a new record median high.
Taranaki prices were up 21% annually from $520,000 to $630,000.
Some 530 properties were sold by auction in January. That is 14.5% of all properties sold, down from 15.6% at the same time last year. This compares to 30.5% of sales by auction in December, and is the lowest auction percentage since July 2020.
The percentage of sales by auction in New Zealand excluding Auckland showed a similar trend.
Auckland saw the highest percentage of sales by auction at 27.8%, followed by Bay of Plenty with 18.7% of properties sold by auction, then Northland with 14.7%.
Mike Jones of ASB said demand was no longer running ahead of supply.
“We've long been expecting a marked slowdown in house price inflation in this year, driven by the confluence of three major macro negatives – higher mortgage rates, tighter credit conditions, and rising supply,” Jones told the publication. “These are now all in play. But the extent of the apparent credit constriction amounts to an extra handful of sand in the market's gears that we didn't previously allow for.”
“A tightening of loan-to-value limits and new responsible lending requirements are also weighing on housing demand right now,” Westpac's Michael Gordon said. “However, we suspect that these will be more short-lived factors while the new rules are being bedded in.”
Jeremy Couchman, from Kiwibank's economics team, said if the January data was anything to go by, 2022 was shaping up to be a challenging year for the housing market, NZ Herald reported.
