Housing risks amid job cuts
As 2024 unfolds, various factors including job security are impacting the housing market, with Kelvin Davidson (pictured above), CoreLogic chief economist, highlighting recent data that points to rising unemployment and subsequent risks to house prices.
Financial stability and housing market resilience
The Reserve Bank’s latest Financial Stability Report (FSR) emphasised the robustness of the financial system, noting the strength of bank capitalisation. However, it also highlighted lingering uncertainties, including the effects of coastal retreat and insurance costs on the housing market.
“We’re a decent way through the mortgage repricing process, with only about 10% of outstanding loans still benefiting from lower rates,” Davidson wrote in a OneRoof report.
Rising unemployment and its impact
Recent figures from Stats NZ have shown a rise in the unemployment rate from 4% to 4.3% in the first quarter of the year, reflecting not just an increase in job seekers but actual job losses.
“It’s worth noting these figures can be a little erratic, and in big-picture terms the unemployment rate remains low,” Davidson said. “Even so, more job losses are expected, particularly with pending cuts in the public sector, posing a clear risk to the housing market.”
House prices stagnating
The CoreLogic House Price Index indicated that the national average property values have remained stagnant, with a minor decrease noted in April.
“After a buoyant end to 2023, it’s no surprise that momentum in property values has faded,” Davidson said.
High mortgage rates and an increase in market listings have shifted pricing power towards buyers, further straining housing affordability.
Construction sector shows mixed signals
While the construction sector faces challenges, with a significant annual drop in new dwelling consents, the numbers are still notably higher than those seen post-GFC.
Davidson suggests a silver lining.
“Clearly, things are downbeat in house-building right now, but with over 35,000 consents over the past 12 months, we’re faring better than the post-GFC period,” he said.
Market trends and buyer activity
Looking forward, Davidson predicted that many borrowers will continue opting for shorter loan terms, reflecting a strategy to benefit from potential drops in mortgage rates. Additionally, first-home buyers are expected to maintain a significant share of market activity, indicative of ongoing engagement despite broader market challenges, OneRoof reported.
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