BNZ confidence survey sees surge in approval of rising house prices; confidence at an all-time high

The RBNZ introduced "speed limits" on high loan-to-value lending from October 1, mainly to target financial stability but also with an eye on taking some of the heat out of the rising housing market.

Most of the heat is being generated particularly in Auckland, though some anecdotal suggestions are emerging that the LVR limits are not having much impact in Auckland - but are restraining the market in areas that weren't overheated.

Regarding comments received in the survey from real estate agents, Alexander said there had been a strong negative LVR impact noted on demand form first home buyers. But listings were still short in some areas like Auckland, Napier, Hamilton, Dunedin. 

One agent noted that "regional" real estate was weakening because of LVR loans now not being offered in the smaller centres. "Anecdotally it appears that these loans are being used in the main centres, predominantly Auckland and Christchurch," the agent said.

QV.co.nz research director Jonno Ingerson expressed the view last week that the LVR limits may actually have a much greater impact outside of the main centres - particularly Auckland and Christchurch.

"Outside of Auckland and Canterbury, and particularly in the provincial areas where demand is lower, the LVR caps may have a larger impact. The removal of first home buyers will leave a gap in the market that may not be filled and so prices would decrease further."

Another real estate agent commenting in the latest BNZ survey said that in central Auckland there were "simply not enough homes available to meet strong demand from buyers".

"November right through to the week of Christmas usually remains busy but potential sellers seem to think it is now too late to put their home on the market so probably going to run out of homes to sell during November!"

Another agent said that in the past three weeks there had been a softening in the market.

"This is not only affecting the lower priced properties. Banks are not so confident about the top end of the market as they are not allowing people in some situations to buy before they have sold $2m plus properties. There is more the on the market right now and it will be interesting to see if prices level out across the board which is what we are starting to see. People are not interested in frenzied bidding at auctions and will chose not to go to the auction rather than get carried away."

Another Auckland agent reported that listings were increasing and buyers abundant, so sales were good.

"Some staggeringly high prices being achieved at auction (now 80% of listings are auctions). Seems to be plenty of money about to purchase houses. Long may it last."

In other findings in the latest BNZ survey, Alexander said it appeared that the effects of the false botulism scare had worn off and Kiwis have gone back to a default setting of relaxation with regard to our growing dependence upon China.

"A net 45% of our 469 respondents are relaxed, up from 26% last month and 28% in September."

Alexander said there remained no upward trend in business intentions of funding their activities through credit.

"This is generally what is happening in many other countries as well where even though household spending is picking up businesses are reluctant to invest and even more reluctant to borrow. This debt aversion could be a factor constraining the duration of recoveries around the world and may contribute to an eventual surge in inflationary pressures in New Zealand as capacity limits get reached and productivity growth slows."