What are some of the things we have learnt in the past fortnight of relevance to where the housing market may be going? First, that demand for housing will be higher than previously thought because the unemployment rate remained stuck at a low 3.4% in the March quarter and job numbers rose 0.8% to a record 2.89 million people.
Second, that mortgage rates increasingly look like they have peaked as banks have cut their 3-5 year fixed rates and one bank back-tracked on the size of increase in it’s two-year rate.
Third, that more house builders are falling over as buyers have switched to looking at existing properties, and many businesses in the building sector find themselves not up to date on tax obligations at a time when margins have been eroded if not destroyed by cost increase.
Fourth, that the rental market is tightening up. My monthly survey of property investors shows rising ease of securing new tenants and increasing intentions of raising rents.
Fifth, that an increasing proportion of the existing housing stock looks like it will be deemed unable to be occupied as a result of the flooding events since late-January.
Sixth, that evidence continues to come in of a strengthening presence of first home buyers in the market.
This latter factor can be seen most clearly in my monthly survey of mortgage advisers which is underway at the moment. With about two-thirds of the usual number of responses in we can see a jump in some measures.
For instance, the net proportion of brokers saying that they are seeing more first home buyers in the market has risen from 42% in April to near 60% now which is the second highest reading on record. Also, for the first time since January 2021 more advisers say they are seeing more investors in the market than fewer. That is an unexpected result.
Why might this be happening?
Partly because of the factors mentioned above, but also perhaps because of the recent announcement that LVR rules will be slightly eased come June 1, and interpretation of rules in the Credit Contracts and Consumer Finance Act clarified to the benefit of borrowers. In fact, a record net 47% of brokers now say that banks are making home finance more readily available. In January a net 7% said finance was getting harder to obtain.
I remain reluctant to place a stake in the ground and say that the housing market is definitely turning.
After all, the Reserve Bank could easily push floating and one-year mortgage rates a tad higher come May 24, consumer sentiment is very depressed, and the new financial year from April 1 has brought a further decline in the proportion of interest costs which investors can deduct from rental incomes for tax purposes.
But the signs are building – and so they should.
We are experiencing a record turnaround in net migration inflows to New Zealand which looks like it will go higher. Job security remains high, and house prices have corrected a long way downward from their excessive peaks of late-2021. That comment applies especially to Wellington and Auckland.
The stock of listings is falling, and the queue of buyers waiting in the wings for two years now for prices to look more reasonable is very large.
All up, things do seem to be changing a bit out there but maybe this is better seen as the market getting set for a better Spring rather than a Winter surge.
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