ANALYSIS: Mortgage interest rates have been falling for about 15 months now, and we are starting to see the effects of reduced borrowing costs in the housing market. One important gauge came this week from Statistics New Zealand.
They released their monthly data on the number of dwelling consents issued by local authorities, and it seems reasonable to conclude that an upward trend in building is firmly underway. In seasonally adjusted terms, the number of consents issued in the September quarter was 12% above the June quarter tally.
This is the best pace of growth since the unsustainable boom during the pandemic, and it means the annual number of consents now stands at 34,900, compared with a post-pandemic low of 33,500 just over a year ago.
This development gels with the net 37% of builders in the ANZ’s latest monthly business survey who expect to be busier within a year. It also says something which perhaps a lot of builders and those in the widely defined residential construction sector would prefer no one said to them. Namely, if you are struggling with workload, then chances are you’re still geared towards the boom conditions of over three years ago and haven’t adjusted to a more normal construction environment.
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We can also see signs of a housing sector upturn in the results of my monthly survey of real estate agents, which I run with sponsorship from NZHL. For the first time since a brief burst of optimism in February, more agents have said prices are rising in their area than those who said they are falling.
Twenty percent of respondents also noticed FOMO (fear of missing out) in the market. This reading is nowhere near the level of 90%-plus in late-2020, but it is the strongest since November 2023 and well up from 5% in May this year.
A net 43% of agents said they had seen more people at their open homes, and a net 31% said they had seen more people at auctions. Importantly, a net 58% of agents report more first-home buyers in the market, whereas just a net 11% of agents say they are seeing more investors.
Independent economist Tony Alexander: "The old days of a housing cycle upturn that inevitably produces an investor-driven splurge have gone. RIP." Photo / Fiona Goodall
Many agents are, in fact, seeing more investors looking to sell, and that is understandable when you consider the various factors in play.
Good tenants are hard to find, rents are static to falling, costs are soaring, prospects for price growth are less than in earlier years as supply grows, net migration flows are weak, and the opposition parties think all investors are speculators and want to tax them into doing something else. One had best hope they fail, because a third of our population lives in rented accommodation and only a small proportion of them are able and want to buy a property.
Over the summer, we are likely to see this emerging upturn in the housing market gather momentum – in terms of house sales, construction, and prices. However, don’t expect strong price growth. This is largely because the average level of house construction in New Zealand as a proportion of our population has been and will be lifted by the many official efforts to free up land, allow intensification, and speed up consent processing.
The old days of a housing cycle upturn that inevitably produces an investor-driven splurge have gone. RIP.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
