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NZ Herald
3 days ago
- Business
- NZ Herald
Housing market recovery delayed despite rising sales volumes
Cotality (formerly known as CoreLogic and one of the foremost authorities on the housing market) recently noted that volumes have been gradually rising for about two years. It points out that the rise in May activity pushed sales levels to 5% above anything we've seen at that point in the year since 2016. On that basis, the slump looks to be behind us, but we haven't seen a recovery on the pricing front. The REINZ house price index (HPI) has fallen for six out of the past seven months. Nationwide prices are unchanged over the past 12 months and still 16.3% below the peak in late 2021. That's not the case everywhere, of course. The South Island has performed much more strongly, with Canterbury, Otago and Southland more buoyant and all within 5% of the peak. The impact of a solid agricultural sector is likely to be part of the reason for that. In contrast, Auckland and Wellington have struggled and are still more than 20% below the heady levels of a few years ago. The median number of days to sell is also elevated, reflecting a sluggish market in which properties sit unsold for longer. It rose to 50 days in June, and has averaged 47 in the past 12 months. That's the highest since mid-2023, when interest rates were rising quickly and the economy was in recession. Excluding that period, it's the highest since 2008 and 2009, during the Global Financial Crisis. There are numerous reasons to explain our underperforming housing market. For a start, affordability is still awful. Prices have been flat for two years, having fallen almost 20% from the peak before that. However, the rise during 2020 and 2021 was so dramatic (48% in less than two years) that, even after the multi-year slump, prices are still more than 20% above pre-Covid levels. That boom was primarily driven by ultra-low borrowing costs, with the one-year mortgage rate falling to 2.2%. In data going back to the early 1960s, there's never been a time when interest rates have come close to being that low, and we might not see them again in our lifetime. Many would argue that prices were pumped up so much during that period that they might need to fall further (or at least languish for a little longer) for reality to catch up. Other costs of home ownership – such as rates, insurance and maintenance – have also increased sharply, while the policy backdrop hasn't been friendly to investors. Net migration has declined much more than expected, after hitting record highs in 2023. To use a technical phrase, it's fallen off a cliff. New migrant numbers (of working age) were comfortably above 100,000 a year 18 months ago, but they've dropped to fewer than 10,000 today. Apart from the Covid-era when the borders were closed, that's the lowest since the 2010-13 period, and before that 2000-01. For many of those who are still here, job security is a concern. The unemployment rate has been steadily increasing for three years, and it's sitting at 5.1%. Apart from one quarter during the unusual Covid period, that's the highest in more than eight years. People are reluctant to make major financial commitments when they don't feel completely safe in their jobs. Unemployment is expected to push a little higher, so a shift in sentiment could be unlikely until late this year or into next year. Nobody can accurately say where house prices will go from here. Plenty of people incorrectly predicted declines in early 2020, and just as many expected a recovery to be under way by now. Reserve Bank forecasts suggest prices will grow by 4.2% annually over the coming three years. That's below the long-term average (which has been 5.7% since 1990) but it's slightly above inflation, GDP and population growth expectations. All these headwinds, as well as a high number of listings, have swung the power balance in favour of buyers, including those looking for a first home. That's unlikely to change in the near term, which is good news in many ways. I'm not sure if any of us should be hoping for another boom. A stable-but-sluggish period for house prices could be a more desirable outcome for the economy, and society overall. For the first time in a long while, the housing market is working more for buyers than sellers, and that rebalancing might be exactly what we need. Mark Lister is investment director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision, Craigs Investment Partners recommends you contact an investment adviser.
RNZ News
15-07-2025
- Business
- RNZ News
Housing market 'steady on the surface', REINZ says
Housing market 'steady on the surface', REINZ says The Auckland region saw a drop of 3.4 percent to $990,000. Photo: RNZ / Kate Newton There has been an uptick in the number of houses sold last month with fewer listings, though little change in overall prices. The Real Estate Institute of New Zealand (REINZ) House Price Index (HPI) for June was up 0.3 percent year on year, which was well below the five-year average for June at a growth rate of 3.9 percent. The national median house price was steady year-on-year at $770,000, while the Auckland region saw a drop of 3.4 percent to $990,000. "The unchanged national median price suggests stability, yet this reflects contrasting regional dynamics, with some areas experiencing renewed growth year-on-year," REINZ chief executive Lizzy Ryley said. "We're seeing a market that is steady on the surface but with some movement underneath at a regional level. Ten out of the sixteen regions reported an increase in median prices compared with the year earlier, with the West Coast up more than 35 percent, while Southland hit a record high median price of $502,500. "Most vendors are entering the market with realistic price expectations and a willingness to adapt to current conditions, especially those motivated to sell," Ryley said. "However, many are receiving offers below their anticipated value, prompting some to delay listing, or relisting, until spring or summer, when market activity may show signs of improvement." The number of properties sold across the country increased by 20 percent year-on-year, though Gisborne saw a 70 percent increase, while Southland's sales rose 35 percent, and Bay of Plenty and Marlborough were both up 33 percent. "June is typically a quieter month for real estate, and while the seasonal slowdown was expected, sales came in slightly below typical early winter levels," Ryley said. "Nationally, seasonally adjusted sales fell by around five percent, suggesting some caution in the market, but compared to this time last year, sales remain significantly stronger overall." Still, national inventory levels rose two percent year-on-year. "While properties are still selling, the increase in median days to sell indicates that buyers are taking a more considered approach," she said. This shift probably reflects a broader sense of caution, with many buyers feeling they have the time to explore their options, especially with the amount of choice they have." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Yahoo
14-07-2025
- Business
- Yahoo
New Zealand home prices largely flat in June, buyers eye better offers
SYDNEY (Reuters) -New Zealand home prices were largely flat in June as buyers await better offers amid higher listings in the market, the Real Estate Institute of New Zealand (REINZ) said on Tuesday. Seasonally adjusted median house prices nudged 0.6% higher from May, though they were flat from a year earlier, REINZ data showed. Seasonally adjusted national home sales fell almost 5% from May, but was up 14.8% from June 2024. "We're seeing a market that is steady on the surface ... the unchanged national median price suggests stability," REINZ Chief Executive Lizzy Ryley said in a statement. "While properties are still selling, the increase in median days to sell indicates that buyers are taking a more considered approach." That has pushed inventory levels up 2% year-on-year to 32,384 properties, data showed. "Most vendors are entering the market with realistic price expectations and a willingness to adapt to current conditions, especially those motivated to sell," Ryley said. "However, many are receiving offers below their anticipated value, prompting some to delay listing, or relisting, until spring or summer, when market activity may show signs of improvement."
Newsroom
25-06-2025
- Business
- Newsroom
Housing market stuck in second gear
The creaky recovery in the housing market has continued. Turnover volumes have floated back up to average levels, and the run of consecutive monthly house price increases has extended to seven (s.a.). Price gains remain glacial though. And stirring a shakier demand backdrop in with our existing concerns about elevated supply points to this dynamic continuing. We've shaded our 2025 annual house price inflation forecast down to a 2-4 percent range accordingly (5-7 percent previously). As usual there are risks in all directions, but we see them as roughly balanced around our central case. We haven't changed any of our interest rate views. The Official Cash Rate and short-term mortgage rates are expected to fall a little further. We nevertheless still see the value in the mortgage fixing decision as tilted more toward longer fixed terms. Impact of macro drivers on our house price view The table below summarises the various drivers of house price inflation and their directional impact on our view. Where are we at? Lower mortgage rates are continuing to thaw out the housing market. As we're seeing in other areas of the economy though, it's a recovery that's creaky and tentative. And the latest (May) set of housing data provided few signs of momentum picking up. Still, to say the overall market is 'flat', is an oversimplification. There is clearly evidence of an interest rate-related boost in the increased number of property transactions taking place, and the associated jump in lending to the sector. The pace of house sales is continuing to trend higher. At about 6800/month (seasonally adjusted), national house sales are now 15 percent ahead of levels this time last year. They're now more or less bang on the long-run average. Transactions in some regions, like Waikato and Canterbury, are well above average (10 percent and 30 percent above, respectively). Importantly, it looks as if mortgage rates have fallen to a level that is finally stirring more interest amongst the heavyweight owner-occupier segment of the market (60 percent of new lending). Investors remain active too, while first-home buyers have retreated a touch. The latter now account for 20 percent of new lending, down from the 25 percent peak. Housing supply – too much of a good thing The extra turnover is not producing the sort of upward jolt to house prices that we might have seen in the past. Prices are rising but they're doing so at a glacial pace. The REINZ house price index registered a 0.1 percent (seasonally-adjusted) increase in May. That was the seventh consecutive (s.a.) monthly gain. But the cumulative gain over that seven-month period amounts to just 1.4 percent. Annualised, that's house price inflation running just north of 2 percent. The now well-understood reason for the subdued price response is the fact there's plenty of supply about. Unsold inventory remains around 10-year highs. Buyers have both more time and more choice. Recent local council property (de)valuations in Wellington and now Auckland just reinforce this tilt in the balance of market power. We've regularly flagged the price suppressing implications of the supply response (see for example here and most recently here). To reiterate a couple of the conclusions from the latter note: The process of working off high inventory levels may be slowed by some of the excess inventory in the rental market ultimately being listed for sale as conditions improve; Supply relativities are likely to produce a multi-speed property market response to lower interest rates. The relatively higher inventories in the townhouse market, in Auckland, and Wellington, suggests those markets may underperform the broader upturn. Recent inventory data from does hint at the supply wave starting to stabilise. The pace of new listings has flattened off in the past few months meaning overall inventory levels have held steady rather than push higher. Demand wobbles The big question confronting housing market forecasters is how long this heightened inventory might take to work through. We suspect it might take little longer than many are expecting now that, as flagged in some of our other publications, we're seeing some wobbles in the demand-side of the economy. High frequency data point to a concerning sag in demand through the middle part of the year. Some of this might be temporary owing to the April and May gyrations in US tariff policy. But at least part of it is expected to stick around. We've downgraded our growth forecasts to just 0.8 percent for this calendar year (annual average GDP growth). Weak labour market conditions drag on. Positive employment intentions have not yet been reflected in actual hiring – job ads are still crawling along 11-year lows. Surplus labour supply is being reflected in falling participation, slowing wage growth, and elevated job insecurity. Net migration has proved to be slow in turning meaning population growth is likely to remain sub-par (<1 percent) this year. There's been a tendency for Stats NZ to revise down initially firmer-looking net migration estimates. Net inflows have thus continued to shuffle along at annualised pace of about 20k. We think these weights on housing demand will continue to lean against the strong support coming through from falling mortgage rates. And combined with our existing concerns about heightened supply, the shakier demand backdrop has us forecasting a continuation of the current slow pace of house price gains. Ongoing small monthly gains tote to an annual lift of 2-4 percent for 2025. We continue to assume a marginal pick-up to 5 percent annual house price inflation through calendar 2026. If all of this proves close to the truth, always a big 'if' given the vagaries of house price forecasting, inflation-adjusted house prices would end this year around the same level as mid-2020, 24 below the 2021 peaks. It highlights the reduced role for housing and the associated 'wealth effect' in this economic recovery. Our assessment is that the risks around these forecasts are roughly balanced, at least as far as the 'known unknowns' go. As we have seen, 'unknown unknowns' continue to come through thick and fast. Mortgage rate outlook Our view at a glance* Floating rates – home stretch Further falls in floating mortgage rates are likely based on our forecasts for additional cash rate cuts from the Reserve Bank. It should be noted though that, with the end of the easing cycle coming into view, the extent of these expected falls is now more limited. A total of 225bps of cash rate cuts have been delivered to date. There's debate about how many more cuts the RBNZ will deliver given heightened global uncertainty and inflationary embers that refuse to die off. The Bank may choose to pause the easing cycle in July to buy more time to assess these developments. Our (unchanged) forecast is still for two further 25bps cash rate cuts in July and August, delivering a 2.75 percent low point in the cash rate cycle. Market consensus is closer to a 3.00 percent end-point. Putting it all together, our best guess is that carded floating rates bottom out in the low 6's in coming months. Fixed rates – falls in shorter terms Fixed mortgage rates have continued to ease since our last report. As expected, these falls have been concentrated at terms of less than two years. Indeed, the two-year rate of just under 5 percent remains the key pivot point for the mortgage curve (chart below). More of the same is expected. The final stages of the Reserve Bank's easing cycle are baked into most term mortgage rates already. There's still room for tinkering here and there should the offshore picture or local data flow spring any surprises. Downside risks predominate in this regard. But our core view remains unchanged in that it's just short-end mortgage rates that can be expected to fall meaningfully from here. Our forecasts have six-month and one-year fixed mortgage rates easing further into a 4.50-5.00 percent range by the end of the year. Absent a new shock turning up, there's limited potential for declines in longer-term rates. It's essentially the final stages of adjustment back to a more 'normal' upward-sloping mortgage curve (see 'forecast' line above). Mortgage strategy Before diving into the rate fixing debate, it's worth reiterating that getting a mortgage strategy 'right' is primarily about meeting a borrower's financial needs and requirements for certainty. Trying to pick the timing of interest rate movements is fraught with difficulty. Given where we are in the interest rate cycle, the broad nature of the fixing decision facing the average borrower could be framed as either: terming out some borrowings now at a rate near 5 percent (for any of one, two or three years); or holding out a little longer by fixing for six months a few more times. Of course, there's also the option to just 'float through the cycle' and stick to floating and six-month terms. But the two options above seem to be where the calculus is at for most mortgage borrowers. There is almost no appetite to fix for four years or longer (see chart below). What have people been doing? 'Peak short' was hit in November when 94 percent of all new mortgage borrowings were fixed for terms of a year or less. As of April, that had reduced to 68 percent as longer fixed terms gained in popularity. That fits with the message we've been running since the start of the year that there may be a less favourable risk/reward in shorter-term mortgage fixes. We maintain that view. Fixing for a short-term like six-months has the advantage of providing the optionality to get a longer-term fix at lower term rates than currently, should they transpire. And a few extra bps off can make a lot of difference to cash flow over a two- or three-year loan period. The rub is that 6-month fixed rates are 30-40bps higher than one-to-three-year fixed rates. Term mortgage rates thus need to be lower when you go to refix just to recoup this extra upfront cost. Breakeven analysis can provide a sense of how much lower. Suppose you are tossing up between a) fixing for six-months ahead of locking in for longer, or b) just locking in now for either one or two years. If you fix for six months at 5.30 percent (all mortgage rates quoted are average of four major banks' 'special' rates, sourced from to break-even you need the one-year rate to fall from 4.95 percent now to 4.70 percent by the time you go to fix in six months' time. The break-even equivalent for the two-year mortgage rate is a fall from the current 4.95 percent to 4.90 percent. Both of these scenarios are entirely plausible, and in a world of heightened risk – most of it negative – a short-term fix has the advantage of full optionality to the downside. But to reiterate the obvious, those are break-evens, so you need slightly larger falls to be better off. For many borrowers, the potential payoff involved in going short, giving where we are in the interest rate cycle, may not be worth the reduced certainty over future cash flows and additional up-front cost. If you're not convinced by either option and want a bob each way, spreading your risk across several terms is also an option. Disclaimer: This publication has been produced by Bank of New Zealand. This publication accurately reflects the personal views of the author about the subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author do not necessarily reflect the views of BNZ. No part of the compensation of the author was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. The information in this publication is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Any statements as to past performance do not represent future performance, and no statements as to future matters are guaranteed to be accurate or reliable. To the maximum extent permissible by law, neither BNZ nor any person involved in this publication accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication.
NZ Herald
17-06-2025
- Business
- NZ Herald
Inside Economics: The recovery hits a ‘brick wall' ... why tomorrow's GDP data won't tell the real story
It should be a simple question. But right now it's anything but. Here's why. Tomorrow we'll get GDP data for the first quarter, which is expected to be better than expected. That statement is a non-sequitur for starters. But that's economics for you, when forecasts are revised sharply before a big data release, we end up with revised expectations, which can sometimes be ... well ... unexpected. Economists and the RBNZ had all been expecting 0.4% GDP growth for the first quarter. After some pretty good manufacturing data and strong agricultural sector performance, they are now expecting 0.7%. That's good news. But it's about where the good news ends. We're already seeing data from the second quarter that is coming in worse than expected. To quote BNZ senior economist Doug Steel: 'It appears the economy hit a brick wall.' The 'ugly' data that Steel refers to are the latest Performance of Services and Performance of Manufacturing Indexes. The two surveys of business performance, run by the BNZ in partnership with Business New Zealand – provide an up-to-date snapshot of business performance. When they are in negative territory, it suggests recessionary conditions. The results for both sectors in May were really grim. After a small expansion in January, the sector has contracted month-on-month since then and has now reached its lowest level of activity since June 2024. That was when New Zealand was in a deep recession (in case your memory needed jogging). Manufacturing was even more disappointing, in some respects. It wasn't as bad, but given that in the past few months it had moved into positive territory, the fact it has fallen back into negative is quite a blow to the recovery. Electronic card data for May also pointed to a stalled recovery. Card spending in the retail sector fell by 0.2% in May compared to April. To top it off – and I think this is particularly significant in Auckland – the property market is not coming to the party even as interest rates fall. The latest REINZ house price index showed just 0.1% growth in May. But in Auckland the price index fell 0.3%, the first fall after several months of very tepid growth. CV or not CV ... is that even a question? When we look at confidence drivers in the economy, house prices loom large. It's not real money, but while it may be sad and true, most homeowners feel wealthier when they see the capital value of their largest asset rising. On that basis, the latest round of council valuations (CVs) landing in Auckland inboxes is unlikely to do much for consumer confidence in the City of Sails. Average residential values have dropped 9% since the last CVs were released in 2021. But some central Auckland areas saw falls of 14%. Any real estate agent will tell you CVs don't really reflect the market value of the house. However, with the market tracking sideways for months now, the CV will have further undercut the 'wealth effect' that the housing market typically adds to an economic recovery. What gives? So what's happened to derail the recovery? There's the tariff shock we had in April. That may have put a dent in confidence that took a few weeks to transmit to the data. Markets were rattled, and if you looked at your KiwiSaver balance you probably felt a bit poorer. The uncertainty may also have rattled business confidence. Donald Trump campaigned in 2024 on widespread tariffs. Photo / AFP But as US trade negotiations and policy flip-flops continue, the markets have kind of relaxed and priced in the risk. KiwiSaver balances have recovered. And while there are still plenty of headaches for local businesses that export to the US, it isn't necessarily a large enough group to dent the whole economy. BNZ's Steel, in his gloomy research note, argues the stalling recovery is quite a concern when we consider we already have the flow-on from lower interest rates and strong agricultural revenue at play. 'Rather than demand indicators incrementally improving, they have sunk,' he says. 'It looks like the positives have been more than offset by other factors, such as significant uncertainty and a soft labour market.' Tipping point In my view, there is a tipping point for economic recovery where momentum should start to build more rapidly. Clearly we aren't there yet, and it is taking a painfully long time to get there. The combination of strong export earnings and lower mortgage rates will ultimately prove an unstoppable force. But it looks like we'll need interest rates to go lower than they are now. 'The big question is whether the suggested softening in recent activity will outweigh the expected starting point optimism in this week's Q1 GDP figures?' Steel says. 'There seems every possibility that it will, keeping the output gap heavily negative into the middle of the year. Moreover, the trajectory of the timely indicators suggest the balance of risk is downward.' That's bolstering the case for the OCR to be cut twice more (as BNZ forecasts) to 2.75%, or even to 2.5% as ANZ and KiwiBank are advocating. Wholesale markets had only one more 25 basis-point (bp) cut by the Reserve Bank (RBNZ) priced, which would only lower the OCR to 3%. 'That's not enough, in our view. We're likely to need another 50bps beyond that, to get the economy humming once more,' wrote Kiwibank senior economist Mary Jo Vergara. 'The RBNZ may pause in July at 3.25%, but we expect the data to evolve in a way that demands more rate relief.' Inflation risk Arriving yesterday, to further complicate the equation for the Reserve Bank, the latest Stats NZ Selected Price Index showed food prices are still rising. This is combined with concerns about petrol prices spiking because of the Israel/Iran conflict, which has economists worrying about inflation risk again. Sluggish demand in the economy is expected to keep inflation subdued in the medium term, but short term, it may be at risk of breaking out of the Reserve Bank's 1-3% target range. Westpac senior economist Satish Ranchhod revised his forecast for the second-quarter inflation up to 2.8% yesterday. BNZ head of research Stephen Toplis went further. 'We had warned there was a risk that annual CPI would push through 3% some time this year. We are now formally forecasting that to be the case. We now pick annual inflation to peak at 3.1% in [the third quarter] of 2025,' he said yesterday. And yes, that is the same BNZ team who were so gloomy about growth prospects at the start of this column. 'We still believe annual inflation will remain relatively well contained over the medium term and should get back towards the mid-point of the RBNZ's target band,' Toplis said. 'We think slowing global demand, ongoing spare capacity in the New Zealand economy, slowing commodity price inflation and the potential reversal of any near-term oil price increases could well see inflation fall below 2% for a period of time.' A short-term spike just increases the complexity of things for the RBNZ. 'The current inflationary noise will intensify the RBNZ's headache,' says Toplis. He also sees strong odds of the RBNZ pausing cuts in July, to wait and see which way things break. Meanwhile, I fear that rising food prices, which consumers tend to feel most acutely, will further dampen confidence and deter domestic retail spending. Falling forecasts It can be hard to keep track of all the changes to economic forecasts. So it's helpful that the NZ Institute of Economic Research (NZIER) aggregates them every three months to give us an overview. The latest NZIER Consensus Forecasts show a downward revision to the near-term growth outlook relative to the previous release of Consensus Forecasts. Annual average growth in GDP is forecast to contract by 1.1% in the year to March 2025 before picking up to 1.9% in the following year. Previous consensus forecasts had annual average growth of -0.8% in the year to March 2025, before picking up to 2.1% in the following year. 'Following the contraction in the June and September quarters of 2024, recovery in the New Zealand economy has been fragile,' says NZIER senior economist Ting Huang. But there is still a broad consensus that the economy is gradually recovering and that over the longer term, lower interest rates will support a pick-up in growth. 'The soft labour market is driving continued caution amongst households,' Huang said. 'With over half of mortgages due for repricing within the next six months, many households will face further relief in the form of reduced mortgage repayments. This is expected to support a continued recovery in discretionary spending over the coming years.' Painfully slow it may be, but it seems the consensus of economists still sees things improving over the coming years. Here's hoping! Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to my weekly newsletter, click on your user profile at and select 'My newsletters'. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to or leave a message in the comments section.
