Introduction of "speed limits" on high loan-to-value lending has had a massive immediate impact on the housing market - particularly on first home buyers, according to the latest BNZ-REINZ Residential Market Survey.
The latest monthly survey of estate agents, conducted after the October 1 LVR limit introduction shows a "substantial change in sentiment".
BNZ chief economist Tony Alexander said this impact was nowhere more noticeable than among first time buyers.
Among the 420 agents responding to the survey a net 41% reported seeing fewer first home buyers in the market. This is the first time since the survey started in April 2011 that agents have reported seeing fewer first home buyers in the market.
The result swung incredibly from a net positive 24.4% of agents seeing more first timers in the market as of September to the minus 41% reported in October. The average for the survey is positive 31%.
Commenting that the first buyer figure was the weakest result since the survey started, Alexander posed the question as to whether these figures would be sustained.
"Probably not once first-home buyers get used to the new rules, as each month makes more qualify for the new minimum deposit rules, as more and more find alternative finance sources each month, and as some shift their purchasing focus to parts of New Zealand other than Christchurch and Auckland."
But that was just the most extreme result in the latest survey. Alexander said that "almost all" measures have registered "substantial declines".
"The net percent of agents noticing more investors has remained positive but fallen to 9% from 26% in September.
"Clearly the minimum deposit rules introduced by the Reserve Bank have had an impact mainly on first home buyers – but nonetheless a net 41% of agents still perceive that prices are rising. The average for this reading is 32% and September’s result was 51%."
A net 11% of agents feel that it remains a seller’s market, down from 30% last month but still above the 8% average.
"Our survey results from this month’s 420 respondents shows that the residential real estate market has lost momentum. The question now is how quickly it will regain it," Alexander said.
A net 16% of responding agents this month said they they were seeing fewer people going through Open Homes.
"This is a strong sign of cooling activity and the weakest result on record. But as for the other measures we will comment on below the question is really how much of this is a knee-jerk response to the LVR changes, quick bank alterations to pre-approvals, increases in low equity premiums etc., and how much will be sustained?"
Only a net 9% of agents report that more sales are going Unconditional. This is still a positive result though the weakest since May 2011.
A net 2% of responding agents said their auction clearance rates have declined, compared with a net 16% saying clearance rates had increased in September – "thus somewhat calling into question the claims that cashed up Chinese have been huge buyers at auctions".
"Were that the case then changes to LVR rules would have had no noticeable effect on auction clearance rates," Alexander said.
A net 12% of respondents report that they have received more requests for appraisals. This was down slightly from September’s net 21% "but not as much of a decrease as recorded for our demand-side focussed measures".
"If the Reserve bank had been hoping that the LVR rule changes would have a substantial impact on house price expectations then they will be very disappointed. While our demand measures have fallen sharply there has been only a minor reduction in agent perceptions of where prices are going to a net 41% seeing prices rising this month from 51% in September. The average reading is 32%," Alexander said
"Price rises are seen as continuing."
12 Comments
Yeah, I'd say that figure actually shoots his argument in the foot. Pretty big changes across the board but very, very little change in the auction rooms, still business as normal, which means it's insulated from the LVR restrictions.... gee, I wonder why..... let me think.....
Just worth adding that these are "net" figures - IE those seeing an increase minus those seeing a decrease. Have added in the September auction response, which showed a net 16% seeing MORE auction clearances. So, the impact in the latest month has been a sharp one.
Short answer, yes. It has gone from dramatically increasing to stable. This is a big decrease in the increase but not a decrease in the actual numbers (as estimated by respondents).
A majority of real estate agents have been saying clearance rates have been increasing (month on month) since May last year, this is the first month since then the majority have not reported it increasing on last month (but at around 0 it is not really a decrease). Now, while the percentage of real estate agents reporting increases has changed dramatically, this is only loosely connected to the amount clearance rates actually change by.
Asian Migrants are all smiles and keep nodding politely because:
1) The RBNZ has effectively removed a huge number of those pesky Kiwi First Home Buyer competitors from the housing market.
2) Migrants dont need our expensive mortgage money from NZ Banks at 5.99% and upwards , when they can borrow in Hong Kong and Shanghai for 3% and less .
3) Migrants buy in groups and syndicates , and this enhances their buying power .
Kiwis have not a hope in hell of competing at auctions against these odds and Greenlabour is right when they say Kiwis will all be tenants on their own country
And across the ditch - "INVESTORS continued to elbow first-home buyers out of the property market in August, with the share of first time buyers taking out new home loans falling to its lowest level in almost 10 years."
http://www.theaustralian.com.au/business/economics/demand-for-home-loan…
A lot of that investment money is coming from SMSF's (self managed super funds) whose imperative is not so much capital gain but tax avoidance, or tax minimisation, or tax structuring. The pressure increases as more and more super-fundees take over the management of their own funds, away from the Fund Managers whose remit does not include residential property. Nearly 50% of all super-funds are now SMSF's out of a $1.3 trillion industry. The Fund Managers have been creaming their passive clients to the tune of $500 million per year in management fees.
We are writing record numbers of 90% mortgages for Kiwi first home buyers, they are still available (for now) as long as people get their head arond the fact that mortgages do not have to come from a Bank and that non Bank lenders are not always more expensive. www.ilender.co.nz
Meantime I have fingers crossed that our house (which we have just listed on the market for Auction early next month) will sell in line with the continuing trend of increasing house prices.
Will be interesting to see what happens with prices over the next three - six months. We may even retire from the market for a while (and set up shop at a relatives house whilst they are overseas on holiday) and cross fingers that the madness will stop eventually.....
Although that is not looking likely here in Christchurch!
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