Mortgages now a NZ$180 bln market

Kiwibank has the largest mortgage market share percentage growth in 2011; ANZ NZ adds the most volume

28th Mar 12, 1:05pm by David Chaston

We review the results of the NZ banks arm-wrestle for mortgage market share in 2011.

The quarterly bank disclosure statements are a primary source of market data and enable us to see how each bank's market share in the all-important mortgage market has changed.

All banks have now reported for the quarter to December 31, 2011, except HSBC, and the winners and losers in this key area can be revealed.

Kiwibank made the biggest marketshare gain during 2011, raising its share by +0.5% (actually +0.485%) to 6.2% from 5.7%. Kiwibank added more than NZ$1.1 billion to its mortgage book, and this now represents a massive 77.9% of their total banking assets.

The biggest bank in the country ANZ New Zealand, operator of the ANZ and National banks, also had a good year, growing its book by more than $2.1 billion in 2011, and raising its market share by +0.5% (actually +0.438%) to 31.5%.

ANZ now has 49.8% of its assets in mortgages, the highest proportion in the bank's history.

ASB has more than 65% of its assets in its mortgage book, a level that has been stable for more than three years. But ASB lost market share, dropping to 23.5% from 23.7% over 2011.

BNZ, which has the lowest level of its assets exposed to residential mortgages at 38.6%, saw its market share rise to 15.2%, a gain of +0.3%.

Westpac on the other hand saw its market share fall slightly to 19.3% from 19.4% over the year. Westpac has 52.1% of its assets in mortgages.

Banks extended their overwhelming grip on this market. Non-bank institutions, which include building societies, credit unions and finance companies, saw a fast withering with their mortgage loan books losing more than a third of their value in just twelve months.

In fact, this share has fallen by more than two thirds over the past five years.

Here is the detail ...

NZ$ million	2006	2010	2011	10-11	Share %
				$ growth
ANZ NZ	44,906	55,036	57,180	+ 2,144	31.5%
ASB	31,155	41,995	42,583	+ 588	23.5%
BNZ	20,973	26,432	27,626	+ 1,194	15.2%
HSBC	2,322	981	1,015	+ 34	0.6%
Kiwibank	2,978	10,081	11,209	+ 1,128	6.2%
NBFI (per RBNZ)	7,419	4,204	2,725	- 1,479	1.5%
SBS	*	1,827	1,761	- 66	1.0%
TSB	1,615	2,307	2,418	+ 111	1.3%
Westpac	25,953	34,302	34,988	+ 686	19.3%
----------------------	------------	------------	------------	----------
Total market	$ 137,330	$ 177,165	$ 181,506	$ 4,341
growth % p.a.	+14.7%	+2.2%	+2.5%

Mortgage books and mortgage brands can be slightly confusing. For example, the ASB mortgage book includes loans from the ASB, the BankDirect and the Sovereign channels. And part of the Sovereign channel includes mortgages marketed via the NZ Home Loans network. However, as NZ Home Loans now has a substantial shareholder in Kiwibank, that channel for Sovereign and ASB generates less than it once did.

The Kiwibank mortgage book includes mortgages written through the AMP network as 'AMP home loans'. And as a point of history, Kiwibank purchased a substantial portion of the HSBC mortgage book back in 2007 as a strategy to build scale.

* SBS was a building society in 2006 and its mortgage book is included in the NBFI totals.

NBFI = non bank financial institution. This data is from the RBNZ.

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34 Comments

by Roger Witherspoon | 28th Mar 12, 1:48pm 1332895718

Oh dear. Mortgages increased from $137 billion to $182 billion. That's a $45 billion increase. Put another way it's a 33% increase in five years. I thought private sector debt was supposed to be falling? Those are scary, scary numbers.

Will the RBNZ never wake up?

by SimonP | 28th Mar 12, 2:26pm 1332897975

especially when you consider that building consents over the last four years are only half of what they were prior to 2008.

by Chairman Moa | 28th Mar 12, 2:16pm 1332897388

That's roughly $43,000 for every person in NZ

by goNZ | 28th Mar 12, 4:42pm 1332906124

I hope Kiwibank dont think they can call on the NZ taxpayer to give them more capital so they can take on the big boyz?

by Horace the Grump | 28th Mar 12, 4:56pm 1332906983

Number of private dwellings in NZ = 1.74 million

Median house price from REINZ = $350,000

Rough value of all NZ private dwellings = $609 billion

Implied LVR = 182/609 = 30%...

oooohhhhh..., I sooooo scared.......

A small amount of thinking and 1 minute of analysis to put the idiots above to shame..

by SimonP | 28th Mar 12, 6:07pm 1332911244

yeah, but not every property is mortgaged. It's the rate of increase that is a worry, I thought everyone was supposed to be deleveraging?

by Chairman Moa | 28th Mar 12, 6:16pm 1332911810

I suppose you can twist and turn any number into meaningful stats (and vice versa). Statistically, by average a person only has one txsticle! Now are you scared?

by scarfie | 28th Mar 12, 7:33pm 1332916406

You sure about that Chairman, I mean what about all the tranny's? What about fella's like Lance Armstrong? Less than one I reckon:-P

by Chairman Moa | 28th Mar 12, 7:50pm 1332917443

I said "by average" and not refer to any specific group...

by Stephen Hulme | 29th Mar 12, 9:29am 1332966578

Dear Horace the Grump

The property tycoon Robert Jones has said in the past that 65% of New Zealand domestic dwellings are mortgage free.

By your calculations:

Implied LVR = 182/213 = 85%

We know that there are houses in the ~50% LVR bracket as the banks had to declare so in their covered bond declarations to the rating agencies. So by implication some punters are probably in negative equity territory.

And yes we are so scared for the simple reason, a trade of a few hundred thousand shares of IBM determines the price for the whole company. Everything gets priced at the margin, hence bankers and their more risky clients can jeopardise the outcomes for all of us, if and when they are forced to sell.

I think it should be mandatory for borrowers to bare a colour rated debt armband to publicly declare their level of debt putting depositor's funds at risk through the reckless actions of our banks, since the RBNZ is so intent in making the latter pay for the indiscretions of the minority with the Open Bank Resolution policy.

by Augusta Funds Mgt | 29th Mar 12, 9:38am 1332967089

Dear Stephen Hulme,

If 65% of NZ domestic dwellings are mortgage free, we should all feel pretty comfortable about the state of the housing market.

Regards,

by steven | 29th Mar 12, 9:53am 1332967996

No we shouldnt.....housing is in a bubble of double fair value.....so there is a real risk that a lot of ppl will be left with substantial neg equity and those who think they have "savings" (according to Treasury who are nincompoops) will suddenly find their asset rich "savings plan" is no more.....then watch spending collapse........retail will go bye bye....its at least 50% over-populated if not 75%.

regards

by Augusta Funds Mgt | 29th Mar 12, 9:57am 1332968248

A bubble that has seen flat values for 5 years now. Hmmm thats and interesting bubble.

by Wolly | 29th Mar 12, 10:24am 1332969874

So by your understanding there was no bubble Augusta?...are you too frightened to recognise the dangers or just determined to remain ignorant. I think the only country not to allow and foster and fall in love with a property bubble was Germany. Our bubble has been kept inflated by the RBNZ as ordered by the banks. Sooner or later Bollard will lose that control ...the aussie market is now in freefall....the banks and media and lying pollies are playing at being Nelson...the overleveraged are being smashed..foreclosure rates are climbing...bank of QL is in the shite.

by Augusta Funds Mgt | 29th Mar 12, 10:29am 1332970170

I didnt say that Wolly. There was a very large bubble, but this burst mid 2007 and fortunately the damage was insulated by accomodative monetary policy, and supply constraints (we didnt have a glut of houses like in the USA).

I'm saying there is no bubble today. Try to read with your brain switched on and stop putting words in peoples mouths, its getting tiresome.

by Wolly | 29th Mar 12, 10:35am 1332970537

You did...you suggested that because the property prices were flat..the bubble was no longer...you refuse to see a bubble. The NZ property bubble did not "burst" and that is the truth.

"I'm saying there is no bubble today"......doh

by Augusta Funds Mgt | 29th Mar 12, 10:43am 1332970993

Wolly, yes i am saying there is no bubble today. What I am not saying is that there never was a bubble. There was a bubble in 2007, but it burst and now there is no longer a bubble. That simple enough for you to understand? What you refuse to accept is that the bubble burst long ago, the GFC has been and gone. It will be a long slow recovery I admit, but your doomsday theories never came true. You were wrong. Dont you think its about time you accepted that?

by Wolly | 29th Mar 12, 10:49am 1332971370

"There was a bubble in 2007, but it burst and now there is no longer a bubble".....hey Bill English the crisis is over according to Augusta FM....honest....we have no bubble....harrrrrrrrrhahaaahaaaahaaaa

What's it like having your head stuffed into the sand Augusta?.does it get up your nose...into that space between the ears.?

The GFC has not gone away..try reading more than comics.

by Augusta Funds Mgt | 29th Mar 12, 10:51am 1332971483

Your reality is clearly different to mine Wolly. I wish you all the best with that.

by Nic the NZer | 29th Mar 12, 10:57am 1332971876

What part of refusing to see a bubble don't you understand Wolly?

by Wolly | 29th Mar 12, 11:26am 1332973606

Jeez Nic you gave me food for thought there...I guess the part I do not understand is how some people can refuse to accept a fact for a fact when it jumps up and boots them in the bum...several times.

I guess there are still plonkers who believe the Earth is flat and is at the centre of the universe.

by steven | 29th Mar 12, 10:49am 1332971362

If there is no cast iron law on how fast a bubble has to burst that I am aware of. So we would need a over-riding event or pressure to deflate a bubble I dont see why it should necessarily burst today, yet.

Plus there are factors holding up prices like,

1) low interest rates for the foreseeable future and not much sign of realised losses (ie I know ppl who bought for $500k and now wont accept $360k so are renting it out) so ppl are hanging on...

2) Some housing shortages so good 9enough) rental returns, and even if someone is making a loss their PAYE tax can be offset against this....

3) Flat, depends on how you qualify that.....eg before or after inflation....or which provence...but lets say +/- 5%.....

Lets look at OZ, even more over-priced but now after a similar period showing signs of drops.

regards

by Augusta Funds Mgt | 29th Mar 12, 10:55am 1332971706

Everything you wrote then explains exactly why there is NOT a bubble. There are too many mitigating factors, it has and will continue to be a soft unwind. We arent as different as you think you and I.

by SimonP | 29th Mar 12, 11:52am 1332975157

A bubble (in the economc sense) doesn't have to pop, it can deflate slowly. Look at Japan, 15 years of gradually deflating property values and still going. Personally I would rather see a short sharp correction (like what we are seeing in the US at the moment) rather than years of sitting in the doldrums denying reality.

by Augusta Funds Mgt | 29th Mar 12, 1:30pm 1332981006

SimonP, you cant compare NZ to the USA. The US has a glut of unoccupied homes, which is taking years to get through. NZ on the other hand has a technical shortage of homes, which is a big part of the reason that houses are expensive in NZ. Its a very different scenario. I am not denying anything, i think residential growth in NZ will be lacklustre over the next few years. Homes are fully priced in this country, but we dont have a structural issue of oversupply as the Amercians do. It would be nice if houses were more affordable in NZ, but I think this is going to take a generation of income growth in conjunction with flattish house prices for this to rectify itself.

by SimonP | 29th Mar 12, 1:47pm 1332982030

I don't believe that there is a net surplus of homes in the US, despite cities like Las Vegas where building went crazy. I agree that the US and NZ are different, we didn't have the sub-prime lunacy to anything like the same extent. Nominal flat = real decline unless we are experiencing deflation. Some income growth would be nice but I can't see that happening without some genuine entrepreneurship.

by Augusta Funds Mgt | 29th Mar 12, 10:12am 1332969168

Define "fair value" Stevie. Fair value is about supply and demand, it is set by the market.

by steven | 29th Mar 12, 11:00am 1332972033

Supply and demand is too a simple way to look at things, economics 101 stuff that may not hold true in the real world.

Well lets look at at least one which is the price of a property v household income....that should be about 3 to 1 but its 5+ to 1....

Also if interest rates are low ppl will if they think prices will "always" be rising buy in....

lets look at supply and demand, sure we have seen BBs buy and they are a big % of buyers and at the top of thier earnings....hence demand is high. However a lot of thier wealth/capital is held in an illiquid asset. So if the income from renting isnt enough they will need to sell down....or sell if they need medical treatment....or simply to meet day to day bills or reduce costs eg paying rates on multpile properties, or make life simpler.....ie not have to work at being a landlord....really "retire'.

Hence if these are not urgent, yes we see flat or little rise..and BBs are 60 somethings so reasonably fit still.....might still want to work yet.....

Lets look at those behind them, X and Ys.....more debt, less of them and poorer paid....demand looks to slaken and supply looks to increase.....

regards

by jimmy squirrell | 29th Mar 12, 12:24pm 1332977041

Augusta is partyly right, it is all about supply and demand, but people wrongly assume supply and demand is purely about number of houses divided by the number of households. There are numerous other factors that ARTIFICIALLY impact on supply and demand such as:

- tax friendly govt policies

- cheap and easy credit (or conversely hard and expensive credit)

- perception (are people concerned about missing out forever or do they think there is no rush as prices are going nowhere)

- demographic shifts (eg baby boomers)

- employment and employment related concerns

- many other factors

The above factors do not affect the long term intrinsic value of an asset as they are VOLATILE, and given a mortgage is a 30 year commitment you can expect them to change at some point. The best measure of true supply and demand is rents, this shows how much people are prepared / forced / able to pay for the tangible value of living in a house. Rental yields are poor in NZ for the most part compared to history, suggesting capital values are too high.

by steven | 29th Mar 12, 12:36pm 1332977771

Agree....

but not only rents IMHO.

I think many things in NZ have too high a capital value.....hence why our productivity has not improved.....it makes no sense to by machinery to do a persons work if that person is cheaper....yet that machinery in another country is cheaper.......making it cost effective to buy.

All this suggests not only capital value but the degree of debt....as you have to service.

regards

by John | 29th Mar 12, 9:07am 1332965258

Hi David

Any chance of data for household non mortgage borrowings?

by David George | 29th Mar 12, 9:30am 1332966645

Sure John.

Consumer credit (debt) is at $11,785,000,000. Down from the $12,642,000,000 peak just over three years ago.

You can find all this stuff on the RBNZ website, for an excell spreadsheet go to: http://www.rbnz.govt.nz/statistics/monfin/RegBanksNBLIs/3822930.html see C5 for the historic data on total non Government debt by sector.

by Haggis Hague | 29th Mar 12, 12:36pm 1332977811

I attended a kids' party the other day. A toddler was delighted with his balloon, which continued to deflate so slowly he didn't notice until, all of a sudden, he was left holding a flacid piece of rubber. Jeez, did he holler!

by Augusta Funds Mgt | 29th Mar 12, 2:40pm 1332985240

Good for you HH, i'm suprised they let people like you into kids parties.