Decline hurts home values nationwide
Home lending demand fell 27.4% in the 12 months to December 2022 as ongoing interest rate rises hurt households, according to the latest figures from Equifax NZ.
Meanwhile, overall consumer credit demand reduced by -7.7% in the final quarter of 2022 as unsecured credit demand (comprising of personal loans and credit cards) was up +4.2% from Q4 2021.
The Equifax NZ Quarterly Consumer Credit Demand Index December Quarter 2022 measures applications for retail credit products including credit cards, personal loans, and home loans.
Home lending tumbles further
Equifax NZ managing director Angus Luffman (pictured above) said mortgage demand continued its downward trend on both 2020 and 2021 volumes, recording a -27.4% drop in the December quarter year-on-year, which represents a continued softening in home lending appetite.
“Mortgage applications are a lead indicator of housing turnover and therefore price movement,” Luffman said.
“Home buyers continue to remain cautious about taking on new lending with potential further reductions in home valuations, along with future OCR increases, tightened regulation and broader cost of living impacts. The decline in demand was consistent right across New Zealand in the cities and regional areas, with Auckland’s decline being - 27.2% and Whanganui having the largest percentage enquiry reduction for this period of -31.2%.”
The September edition of Equifax’s Quarterly Consumer Credit Demand Index showed residential mortgage demand dropped 31.8% year on year.
“Whilst there has been some improvement over the course of 2022, mortgage demand remains very soft as a significant proportion of consumers remain cautious about the market, with concerns around future OCR increases, together with reductions in house valuations,” Luffman said.
“We expect cautiousness to remain in 2023 as the Reserve Bank seeks to tackle inflationary pressures through OCR changes.”
A new report by the REINZ revealed home values eased for a 13th consecutive month as the New Zealand housing market was still some way off finding its floor. According to the REINZ, house prices dropped another 1.2% month-on-month (mom) in seasonally adjusted terms.
ASB Bank economist Nathaniel Keall said the New Zealand housing market correction was still looking orderly and was proceeding at a slower price than the large gains of the boom years.
“It’s a sizable decline in cumulative terms as all-up, prices are now 15% below their November 2021 peak based on seasonally adjusted REINZ data,” Keall said.
“Using March 2020 as our rough starting point for the dramatic COVID-era upswing in REINZ Housing Data, about half of those house price gains have now been eroded. By the end of the current cycle of price declines, we expect most of those post-pandemic gains will have eroded.”
Credit demand enquiries stabilise
Luffman said a continuing stable trend in overall consumer enquiry volumes across 2022 was welcomed.
“Enquiries for unsecured credit are up +4.2% year-on-year for the December quarter as a result of increases in credit card demand,” he said.
“This lift in enquiry was supported by increases in credit card demand (up +25.4%), which is likely influenced by pre-Christmas shopping and holiday season travel. The strongest regions for credit card enquiries (year-on-year) were Auckland (up +34.8%), West Coast (up +33.5%) and Taranaki (up +32.0%), with Gisborne experiencing the only drop of -2.1%.”
Luffman said the credit card decline in Q4 2022 was unexpected as unsecured credit demand for credit cards increased 7.1% in the 12 months to September 2022.
“The improved trend in credit cards was across most regions, with Auckland being the strongest. Only three regions – Gisborne, Wanganui and Marlborough – experienced softer demand for unsecured credit with a year-on-year reduction in credit card enquiries of -7.8%, -6.3% and -8.0%, respectively.”
Personal loan demand falls further
Luffman said personal loan demand was down -10.5% across all regions in the December 2022 quarter.
“Against the rest of New Zealand however, Auckland had a much better outcome for the December 2022 quarter with a -1.5% drop in enquiries year-on-year,” he said. “However, looking back to Q3 2022, personal loan demand declined in most regions except for Auckland (up +15.0%) and Wellington (up +1.3%).”
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