The five things you need to know about the housing market this week.
1. Fourth drop in a row
The Cotality Home Value Index for July, published late last week, showed another modest monthly fall of -0.3%; not a collapse, but still the fourth decline in a row. The national median of $804,303 is also 0.7% down over the past year and remains almost 18% below the peak, albeit 16% above the March 2020 pre-Covid level.
Tauranga, Wellington, Auckland, and Hamilton all edged down in July, while Christchurch and Dunedin saw small rises. Queenstown also dipped a bit, but there was continued growth in values for Invercargill.
Start your property search
The big picture, though, is that property sales remain sluggish and, with listings still relatively high, values are also treading water. Of course, there are always two sides to the coin, and although this won’t be pleasing to some property owners, it remains a favourable time to be a buyer.
2. Mortgage lending is flattening off
There was $8.4 billion of gross new lending in June; a touch higher than a year ago ($8.3b), but the second month in a row without any meaningful growth to speak of. Of course, a slowdown in growth isn’t too much of a surprise given that lending has already recovered from the troughs in 2022 and 2023, and we’re now in an environment of heightened economic uncertainty and rising mortgage rates. First home buyers continue to make full use of the LVR allowances.
3. Encouraging data but the world keeps changing
Last week Stats NZ reported another small rise in filled jobs in June, while ANZ’s business and consumer confidence surveys both showed an improvement in July. At face value, these indicators would point to support for the housing market. Of course, US-Iran tensions have flared up again, and global uncertainty around economic growth, inflation and interest rates remains high. As with everything at the moment, good news is welcome, but you also have to be cautious.
Cotality chief economist Kelvin Davidson: "Property sales remain sluggish and, with listings still relatively high, values are also treading water." Photo / Peter Meecham
4. Will the labour market figures sway the OCR outlook?
On Wednesday this week, we’ll get the official labour market figures for Q2 from Stats NZ. This is a key indicator to watch, because it (potentially) has significant implications for interest rates. On one hand, we may see labour supply go up slightly, but employment stay more subdued, which could lift the unemployment rate a bit – not a signal for OCR increases (especially when unemployment is already above "normal" at 5.3%). But any drop in the unemployment rate – particularly if it was accompanied by hints that wage demands may be starting to rise as people look to compensate for higher living costs – would only tend to reinforce the expectation that the Reserve Bank will continue to push the OCR back towards a more neutral level next month.
5. Still fixated on fixed rates?
Also on Wednesday, the Reserve Bank will publish the loan terms chosen by new borrowers in June. Lately, as households have become more concerned about rising interest rates over the medium term, they’ve been looking to get ahead of those moves by locking in for longer right now – the two-year fixed rate has certainly been popular in recent months, after a previous period where floating or short-term (e.g. six-month) fixed rates were more in vogue. The trend to take longer fixed rates seems almost certain to have continued in June.
- Kelvin Davidson is chief economist at property insights firm Cotality
