The housing market is bouncing back strongly after the initial shock of the introduction of 'speed limits' on high loan-to-value lending, latest results from the BNZ-REINZ Residential Market Survey indicate.
The February results of the survey - which attracted 469 real estate agent respondents - showed a strong surge in interest from housing investors. The results also showed that the market has now rebounded into "sellers" territory, which it occupied from May 2012 all the way through to November and December last year when it swung sharply into being a "buyers" market.
And while the would-be first home buyers are still shying away from the market, the latest survey shows a considerable bounce-back from the extremely negative position revealed in the December survey.
The LVR speed limits were introduced by the Reserve Bank October 1, 2013. The move was principally aimed at ensuring financial stability after some banks had been aggressively raising the proportion of their low equity lending, but also with an eye to cooling the rising house market.
Latest Real Estate Institute figures suggest the LVR limits have been dampening particularly sales volumes, but also now prices as well.
However, most economists believe that the impact of the LVRs will be relatively short-lived, and the results of the latest BNZ-REINZ survey suggest that is becoming the case.
BNZ chief economist Tony Alexander said "all of the measures" used to gauge the strength of the residential property market improved in the latest month compared with the last survey undertaken in early-December.
"Most notably a net 5% of the 469 responding agents now feel that it is once again a seller’s market compared with a net 16% in December and 17% in November who felt it was a buyer’s market," he said.
The net percentage of agents seeing a decline in the number of first home buyers had dropped from nearly 80% readings in November and December.
"...But at a net 40% agents are still seeing first home buyers stepping back from the market."
Alexander said, however, that while what he termed the RBNZ's "credit controls" were having a substantial impact on first home buyers – there was "not much of an impact on investors".
Investors keen
"Whereas in December a net 6% of responding agents said that they were seeing more investors, that reading has now jumped to a net 21% which is above the 16% three-year average though still down from 26% in September," he said.
"In fact whereas real estate agents estimate just 16% of their sales are to first home buyers compared with 24% in our March 2013 survey, estimated sales to investors stand at over 19% from 18.5% nearly a year ago."
Alexander said in December agents were asked to estimate the proportion of their sales going to first home buyers. The outcome was 15.3% which was well down from 23.3% in May last year and 23.6% in March.
"We repeated that question this month and got an outcome of 16.2%. So perhaps there is a slight recovery happening in first buyer activity. We shall monitor this."
After recording the weakest ever result two months ago with a net 52% of respondents saying they were seeing fewer people attending Open Homes, this month a net 15% of respondents said that they were seeing more people.
LVR 'shock' fading
Alexander said this was is equal to the average outcome since the survey started in April 2011 "and tells us that the shock effect of the LVR regulations is fading".
Auction clearance rates were "sitting in negative territory" for three surveys, but this month rebounded to a net 1% of agents seeing an improvement in auction clearance rates.
"This signals to us the ending of a period when buyers were backing away from auctions," Alexander said.
There was also a strong lift in the number of agents seeing more people asking for appraisals.
This has turned around to a positive net 26% of agents seeing more people seeking appraisals compared with a net 8% in December that were seeing fewer people coming forward "leading us to comment that while the LVR rules were scaring away buyers they appeared also to be scaring sellers away as well", Alexander said.
Prices going up
With agents seeing more buyers back in the market they were also now seeing more upward movement in prices. A net 35% of responding agents said that they felt prices were rising compared with a net 13% in December and 23% in November. Before the LVR rules came in on October 1 this reading was a net 51% positive.
Alexander said given that the survey results were showing more investor interest and less first home buyer interest, "the reasonable assumption" to make was that the home ownership rate in new Zealand would continue its decline.
"Census results released last week show an ownership rate of 64.8% from 66.9% in the 2006 census. Put another way, back in 2006 33.1% of people did not own the house which they live in but now 35.2% are in that state.
"The Reserve Bank’s credit controls are working to reduce New Zealand’s home ownership rate," Alexander said.
15 Comments
While I aggree that the number of properties owned by investors has grown, I do not see how it is at all possible to link that in any way to the introduction of LVRs which occured well after the last census.
I suspect it has more to do with the fact that more people are worse off (looking at inflation adjusting wages from the two census periods) and with housing increasing faster than inflation even fewer can afford it.
Today's lesson: what is a "net percentage"?
Example 1. "Most notably a net 5% of the 469 responding agents now feel that it is once again a seller’s market compared with...". It means that 52.5% of agents say it's a seller's market, versus 47.5% who say it's a buyer's market. The words "net percentage" come from "subtracting the percentages", giving
52.5 - 47.5 = 5.
Example 2. "But a net 40% of agents are still seeing first home buyers stepping back from the market" means 70% of agents are still seeing first home buyers stepping back, and 30% aren't. Here,
70 - 30 = 40
explains where the "net 40%" figure comes from.
To get the actual percentages, take half of the "net percentage", and add or subtract from 50 percent. In the "net 40%" figure in Example 2, half of 40 is 20, and adding or subtracting from 50 gives 70 and 30.
Enjoy.
Sentiments of property agents and banks? I would take this report with a huge pinch of salt...property market fluctuation is not a matter of days or weeks or even months. LVR impact is longer term and far reaching than a simple matter of investors or first home buyers rushing in now. Eventually the market will have to find its sustainable equilibrium - and to me, that is DOWN, without a doubt. For estate agents/ property agents to continue fanning and inciting a bullish market is just to be expected - for obvious reasons.
These are all examples of the Naomi Klein, Shock Doctrine --- invented crises, sudden booms,
House price booming, now declining, interest rate hikes emergency, rate cuts, unemployment rising be fearful, unemployment/household survet = increased employment,
retail spend up, credit card transactions down, petrol up then down,
panic you wont have enough for retirement, its ok we,re all saving enough.
Your Kiwisaver funds should in bleeding edge stocks, no conservative is ok, wages flat, now wages predicted rise 3%.
This is a clever game/war waged against the minds of the population .... all to benefit institutions with large resources to exploit the fears of many.
Always be sceptical. Ask - where did the story come from? Who benefits when you react?
When a land agent is rung up by someone asking about the market or is asked to fill in a survey about the market are they going to tell the truth? Hell no! Just look at the huge number of complaints to their disciplinary authority and the ensuing decisions and you will soon see their are a lot of dodgy people in this "so called profession." In reality of lot of them are poorly educated or have failed in their first chosen careers and have resorted to working in real estate.
Lets break down what they do. You give them a key and they look after your home. They take people to it and say what a lovely property it is. Someone falls in love with it and buys it and the agent gives you back a key. For that effort you pay them hundreds if not sometimes thousands of dollars an hour. Human beings are gullible and slow to learn. If you do not believe me just have a good look at the type of car your agent pulls up in next time. More often than not it will be a lot more expensive than yours.
My sentiment exactly. Estate agents have their own agenda. So do investors who have already heavily invested in the market, esp the AKL market. No one want us to believe that with the LVR and plan to build another 30,000 in the next 3 years, will have any significant impact on NZ houses. As soon as there is a smallest sign of the market softening, droves of people with vested interested will try to "talk up" the market. My suggestion is to look at other high density cities who introduced LVR (NZ is not the only one and certainly not the first), and see how that affect affordability / market sentiment / and eventually the price. Property cylce is usually based on a 5-7 years cycle, not 5-7 months period.
"Also what we are planning to build is more high rise apartments and not necessarily more standalone houses"
Have to disagree with that. Before the Housing Accord the Unitary plan expected upto 40% of new housing to be in green fields developments like Henderson Heights and Flat Bush.
With the housing according, that has been increased a little, though mostly it's a speeding up of the greenfields developerments rather than additional greenfields.
"and not necessaily in the areas that people want to live"
Indeed, standalone houses that aren't a painful commute to the city? There's very little of those being built. I wish we could just wipe out all of the morningside industrial area and put in decent english terraced housing. Housing where everyone gets a nice garden that backs onto their neighbours gardens. Not silly auckland subdivisions where no one gets a decent private garden because all their neighbours have sub-divided so your garden backs onto 5 houses instead of 5 gardens. And not silly auckland terraced housing where you don't get a garden at all, and your balcony has a view of your opposite neighbours car port, and your bedroom window opens out onto a major arterial.
Those victorians knew how to plan suburbs.
Yip, vested interests everywhere, you'll see comments on here like "I can't wait for the market to crash, which it's going to do, then I'll buy my first house!". Just a vested interest trying to talk down the market for their own personal gains. You might even get comments from investors trying to talk down the market who have sold too soon (have read the cycles wrong) and want buying opportunities again. The lesson we should all learn is that bugger all people read these commentaries and we have 0 influence on the market.
It's not only here:
UK PROPERTY BUBBLE FORMS
"Asking prices for U.K. houses jumped above £250,000 ($419,050) in February, up 6.9 percent on the same time last year, marking the highest annual increase for more than six years in a fervent UK property market, according to a new study.
The 6.9 percent year on year rise pushed real estate prices up by £16,223 across Britain, data from property website Rightmove's housing index showed, fuelling further concerns that the country's housing market is trapped in a bubble. Past U.K. housing bubbles have had a damaging effect on the economy when they burst, with many homeowners finding themselves in negative equity. A new crash could also dampen consumer spending, with knock-on effects for Britain's on going recovery.
An 18 percent boost in the number of new sellers compared to a year ago failed to make up for a supply shortage driving property prices higher."
Link
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