Guest post from Tony Alexander
In my last column of two weeks ago discussing the state of the residential real estate sector in New Zealand, I noted that we have entered the endgame for the period of falling prices and sales which has broadly been underway in fairly brutal fashion since just before the end of last year.
One factor I cited was the uptick in the net proportion of mortgage advisers reporting more first home buyers looking for assistance to a net 8% positive, the strongest such result since February 2021. My latest survey of advisers has seen that proportion jump even further to a net 47% seeing more first home buyers.
I also have the results of my monthly survey of real estate agents with REINZ in hand. They show that at the end of August a net 5% were seeing more first home buyers.
Assisted by alterations to rules for accessing KiwiSaver-related funds from the government they have shifted their focus away from trying to pick the bottom of the price cycle towards taking advantage of a doubling in listings numbers from a year ago and average 12% decline in prices.
For investors things are better, but none of my surveys yet shows any groups of respondents seeing more rather than fewer investors. The survey of mortgage advisers noted just above has most recently shown a net 34% of agents seeing fewer investors in the market. This is better than a net 60% the month before but still firmly negative.
Similarly, my survey of mortgage advisers with mortgages.co.nz has shown a net 4% still seeing fewer investors, compared with a net 33% a month ago.
First, interest rates are not likely to truly start going down until the end of 2023, though hopes of that happening will exert a steadily growing influence as we go through the coming year.
Net migration flows are getting worse and that will tend to stay the hands of many people thinking about jumping back into the market.
The passage of time is decreasing the proportion of interest costs which investors can deduct from their taxable income and that will keep many wondering if there might not still be a wave of selling by investors to come – though I personally doubt it.
The unemployment rate is likely to go up from the current 3.3%, and lending rules which tightened aggressively late last year will be only slightly further eased.
The fundamentals in play suggest 2023 will bring a slight recovery in housing turnover and rising prices, with the latter assisted by further increases in construction costs. But gains might only average around 5% or so and it will be some time before prices on average get back to the fairly ridiculous levels they were pushed to late last year when a renewed FOMO frenzy on the back of a shortage of listings caused buyers to surge forward again.
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