1. Property values still in a holding pattern
The latest Cotality house price figures highlight sluggishness in the overall housing market. The nationwide median property value of $806,551 at the end of November was the same as October’s tally, but still 17.4% below market peak in early 2022 and only a modest 1.1% above the June 2023 trough. Auckland’s median property value dropped 0.2% over the month, and 2.2% over the year to $1.048m. Tauranga, Hamilton and Invercargill, on the other hand, seemed to be ending the year on a high, with monthly lifts of 0.6%, 0.7%, and 0.8%, and annual lifts of 1.2%, 0.3% and 3.9% respectively.
Although wider sentiment about the economy and property market seems to be turning upwards (and some housing markets are stronger than others), values themselves are generally proving a little slow to shift.
2. Dwelling consents continue the run of solid economic news
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Coming hot on the heels of stronger news on retail sales, business confidence, and general economic activity, last week’s Stats NZ figures showed that the number of new dwellings consented in October (3520) was up by 24% from the same month last year – the third increase of more than 20% in the past five months. The annual running total has now lifted to around 35,550, the highest level since February 2024 (when the sector was still in decline from the post-Covid boom).
To be fair, this emerging upturn is still in its early days. But with mortgage rates down and the lending rules (e.g. LVRs, DTIs) still incentivising new-builds, there’s every reason to think that the construction sector will continue to improve. That’s great news for wider economic activity, but it also bodes well for medium-term housing affordability.
Cotality chief economist Kelvin Davidson says the economy is starting to feel more positive, but property values have been slow to shift. Photo / Peter Meecham
3. Getting close to the end for floating/short fixes?
Given there was a 0.5% OCR cut early in the month with a strong indication of more to come later, it was no surprise at all to see the popularity of floating mortgage rates and 6-12 month fixes in October. On the flipside, the share of new loans in October that were fixed for more than a year dropped to just 18%, the lowest since January (10%).
As rates have been falling, it’s made sense to stay as short as possible to ride the wave down, and then perhaps look to fix longer again when the floor has been reached. With the latest expectations being that the OCR will now be on hold for a year or so (before potentially starting to rise again), the decision point may have been reached. Fix longer? And if so, how long? Up to you!
4. A budding upturn for net migration?
This week, Stats NZ will release October’s net migration figures, which have been hinting at a rise, as departures flatline and arrivals edge higher (although downward revisions are always possible). It’ll be interesting to see what happened in October, as well as in the coming months; a pick-up in our labour market relative to Australia (which is expected) would tend to be correlated with a stronger net migration balance. That said, it’s starting from a low level and is a key reason why property rents have been so weak lately.
5. Retailers and manufacturers hoping for good news
We’ll also get November data this week for manufacturing activity from BNZ-BusinessNZ and electronic card spending in the shops from Stats NZ. In the past few months, there have been early signs of a pick-up for manufacturing, although card spending has remained a bit patchy. With a range of other indicators now improving, it wouldn’t be a surprise to see both these measures also come to the party over the next month or two.
- Kelvin Davidson is chief economist at property insights firm Cotality
