1. Sales return to normal but ...
There were around 8200 property transactions in May, which was about 16% higher than the same month in 2024 and the 24th rise in the past 25 months. So it’s been a fairly solid and sustained period of growth for property sales. But don’t forget that they started from a very low level back in 2022-23, and only now could you say they’ve returned to normal – e.g. May’s figure was 5% above the average for that month going back to 2016, but before March, activity tended to be below its decade average.
In other words, activity is tracking along fairly well but not booming. And given that the stock of listings on the market is starting from a high level, it could be a while yet until buyers lose a more noticeable degree of their bargaining power.
2. First-home buyers and investors out in force
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First-home buyers' share of purchases in April and May was 27%, close to record highs. Meanwhile, mortgaged multiple property owners (including investors) are running at around 24% of the market, a continued increase from their trough of about 21% a year ago. Presumably, many smaller investors are pretty happy to have smaller cashflow top-ups each week as mortgage rates drop.
Cotality chief economist Kelvin Davidson: "There seems to be a growing chance that the Reserve Bank won't cut the Official Cash Rate at its next meeting, on July 9." Photo / Peter Meecham
3. The economy exceeds expectations ... three months ago!
GDP rose by 0.8% in the first quarter of the year, generally better than most forecasters’ expectations. However, I wouldn't get too excited, given that we’re almost at the end of June, and we already know that the past few months have tested the economy.
Indeed, the subdued economic backdrop is still a headwind for the housing market. Admittedly, the average mortgage rate currently being paid across the stock of existing fixed mortgages is around 5.9%, with many of these borrowers soon to reset down to 5% or less. But if people decide to save that extra cash to rebuild their buffers or perhaps even shorten their loan by keeping repayments the same, a potential knock-on effect is that the economy and housing market remain muted.
4. Inflation is still a risk
Last week’s selected price index figures from Stats NZ are a bit concerning. Key items such as food rose steadily in May, as did household energy costs, although rents were flat. The figures cover about 45% of the benchmark Consumers Price Index, and suggest overall inflation for Q2 will be up on Q1’s figure of 2.5%. There seems to be a growing chance that the Reserve Bank won't cut the Official Cash Rate at its next meeting, on July 9.
5. Bank-switching still popular?
The Reserve Bank’s May mortgage lending figures will be out on Friday. The breakdowns by loan-to-value ratio rules and debt-to-income ratio rules will be worth examining, as well as the amount of bank-switching activity. There has been a lot of that going on lately, with many people having the ability to go to a new lender at low cost (because their floating/short-fix loans mean no break fees) and to secure an appealing cashback offer too.
