Days to secure sale also up, report reveals
The housing market is looking grim as the number of property listings has fallen almost 50% from 12 months ago, a new report has revealed.
Meanwhile, the median days to sell a home is creeping up as prices continue to drop.
Bluestone Home Loans has released its Quarterly Home Loan Report which was delivered by economist Cameron Bagrie (pictured above). He said new home loan commitments were down across the board.
“Looking at new loan commitments, the general trend is down between $2 billion to $3 billion from 12 months ago,” Bagrie said. “The dollar amount of new loans between April, May and June 2022 was respectable from pre-COVID levels. It is good to see some normalcy coming through the other side.”
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Bagrie said Auckland had an excess supply of properties as rents were starting to fall with many properties in the CBD available for lease due to an overbuild issue.
“Property prices are down 15% in Auckland from the peak in November 2021 and down 10% on average across the country,” he said. “You can’t eat like an elephant and expect to pass wind like a mouse when it comes to the property market, which is an unfortunate reality. The Reserve Bank really need to break a few bones across the property market to secure some relief.”
Bagrie said he was seeing asset values drop across the board.
“Over the last 12 months, we have seen a rise in the share of housing debt coming from non-bank lenders (some in response from our old friend the CCCFA) as some lenders appetites are tightening up,” he said.
“The debt is rising amongst the non-banks so we need to be mindful of this. Many non-banks are providing an outstanding service, with quite a few ex-bankers working for them now and providing solutions which is what the market needs.”
Bagrie said he was seeing a big shift as banks reallocate capital from the business sector towards the lending market as directed by the RBNZ.
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“This has resulted in a fall in business lending as higher risk assets (properties) across the country have seen the business sector no longer able to easily access money from the banks for commercial property or investments,” he said. “However, it is encouraging to see businesses re-accelerating as inflation and high demand are impacting the economy.”
Bagrie said there would be a rise of fixed mortgages rolling off record low interest rates in the next 12 months.
“Many mortgage holders can expect their new interest rate to start with a five, which will be a massive shock to households,” he said. “All mortgage holders will be facing added pressure as we progress through the next period as the Reserve Bank still has a lot of policy tightening to go.”
Bagrie said financial markets have moved aggressively over the last few months as the official cash rate has pushed higher.
“As a result, we are seeing weak consumer confidence and property prices easing, not just in New Zealand but also in Australia and the US,” he said.
“The question is when do you take leap of faith and stop hiking the OCR. I think we need to see lower inflation figures before the Reserve Bank pauses its rate hikes as they haven’t broken enough economic bones. The common denominator is everyone is still busy and until people are not busy, then inflation pressures will remain.”
