The Real Estate Institute in their monthly report for October stated in headlining their report that "LVR Restrictions Impacting Sales Volumes" - they went on to say "sales volumes eased back in October following the introduction by the Reserve Bank of restrictions on high LVR lending".
The actual sales in October were 6,778 which was up 2% on a year ago, that month of October 2012 was up 32% on the prior October of 2011, which itself was up 28% on the prior year being 2010.
So in the space of 3 years sales volumes are up 74%, in fact the level of 6,778 is the median for the past 21 years.
Property sales growth is slowing - looking at the trend of monthly sales as compared to prior year we are coming to the end of a run of 30 straight months of growth in sales year-on-year, by no means the longest run, but a strong recovery from the property crash of 2008 as the chart below shows.
Typical towards the end of a long run of growth comes more erratic variance as the growth begins to turn negative as we are seeing in the October figures.
Added to these factual statistics from the Real Estate Institute was the monthly survey of real estate agents published by the BNZ and initiated through the Institute.
This survey which I have mentioned before could be a vital sense of a pulse of the property market as the Institute represents almost all licensed agents.
Given that it is a shame that from the population of close on 10,000 such low reporting of the monthly survey occurs. This month the survey looked for verbatim responses to the statement "What effects have you noticed from the LVR rules?".
There were 247 responses published by the BNZ report. A quick count up had 180 of these comments showing a very pessimistic view on the impact of these LVR changes and the impact on first time buyers and open home attendance as well as performance of auctions. Here is sense of the responses:
• auction rate under the hammer has dropped dramatically
• number of first home buyers in the market has decreased markedly
• More very frustrated Vendors
• Majority of first home buyers dropped from the market
• Drastic decrease in competitive bidders/bidding
• Massive decrease of first home buyers
• Definite drop off in first home and migrant buyers
• Huge decrease in people looking at property
• A lot of Sale and Purchase agreements are not going unconditional or if they are it is at a cheaper, renegotiated price
• Massive reduction of attendees at open homes
• Overnight no enquiry from first home buyers. they have been scared away
Reading through these and the other verbatim comments reflecting a net 72% negative you would soon become depressed about the future months of property sales with a sense of up to 30% decline as that has been the often quoted component of 1st time buyers.
However the reality is there is no accurate source of data that shows what 1st time buyers actually represent of the market so any prediction of effect is largely guess work, and the views of agents from what is a very small sample - just 247 from 10,000 (2.5%) should be taken with a note of caution.
There is though data from the Reserve Bank that reports the weekly levels of Housing loan approvals of both new mortgages and re-mortgages.
Such data provides vital opportunity for analysis as I have done in the charts below.
This chart shows in the red line the 4 week moving average of the number of housing loan approvals made by trading banks.
The last few weeks of October certainly showed an accelerated decline, however the trend as best seen in the grey line being the 12 week moving average shows that volumes had been declining since a peak in May of this year, however they still remain around 6,000 a week.
The next chart shows the trend of volume comparing the 4 week moving average year-on-year.
This chart certainly would seem to show a picture of the announcement of the decision to implement the speed limit of high LVR triggering a slowing in volume of new housing loan approvals, in effect reversing a period of recovery which began in July, although as with the prior chart the longer term trend still shows slowing growth.
We will need to wait until at least the November sales figures and more likely until the new year as well as to study housing loan approvals before the definitive statement can be made as to the true impact on the changes as a consequence on the high LVR restrictions, indications certainly show an impact, though that impact in sales is not huge as yet.
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The above article was written by Alistair Helm, and is republished with his approval. The article was originally published on Properazzi here
2 Comments
Okay , so we will know by January ( about 10 weeks time) whether the LTVR is really affecting the market in terms of demand , sales volumes , price levels etc .
I still beleive that strong fundamental demand exists , and that the LTVR will not reduce intrinsic demand for housing , particularly affordable housing .
Once young Kiwis build up savings in cash or Kiwisaver you will see them back in the market.
The real problems in housing will only emerge when interest rates revert to the 20 year average ... as they will
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