ANALYSIS: Each month I run five surveys of different groups to find out what is happening in the economy and the housing market in particular. Ahead of the Iran War, things were looking okay but not spectacular. It was reasonable to say that the economy might grow 2.5% this year, and that house prices might rise by as much as 5%.
But after February 28, all measures deteriorated and, in some quarters, there was talk of a recession. Some numbers supported this, including the net proportion of consumers in my Spending Plans survey who said they would buy more things, which fell from a net 23% positive in February to a net 4% positive in March and then a net 38% negative last month.
Now, some pulling back from the brink is starting to emerge. I ran this month’s Spending Plans survey over the past few days, and although the result is still poor at a net negative of 26%, it is less poor than it was a month ago. Consumers are adjusting to the new reality of higher fuel prices and perhaps have grown less fearful of shortages. We are adapting.
Discover more:
Start your property search
- Tony Alexander: It's 2021 again for sellers ... but not in a good way
- Kiwi pop star's shopping spree: What Neil Finn paid for notorious pub
- Former Warriors star finally sells his home after price drop
My latest survey of mortgage advisors with mortgages.co.nz has shown that although investors remain scarce on the ground, the easing off of first-home buyers from the market is less bad. Last month, a net 54% of brokers said that they were seeing fewer first-home buyers. That proportion now is a net 16%.
That is still negative but substantially less so than a month ago. Note, however, that for investors, exactly the same net 48% of brokers have said that they are seeing fewer of them looking to make a purchase.
As noted here last week, real estate agents are seeing greater weakness than a month before, and for the housing market overall heading into winter, the outlook is yet again one of restraint, which provides ample space for young buyers to continue to dominate the market as they have been doing since the start of 2023.
Independent economist Tony Alexander: "For the housing market, the outlook is one of restraint, which provides ample space for young buyers to dominate the market." Photo / Fiona Goodall
In fact, feedback from brokers in my survey this month suggests banks are orienting their lending more towards this group rather than investors.
Looking again at the results of the Spending Plans survey, there are only three areas where people say they plan to spend more money: shares, probably because offshore markets are holding up despite the Iran War; home renovations; and groceries.
The grocery reading of a net 33% positive will reflect expectations of higher prices and the simple need to stump up with more cash if one’s family is to eat. The net 3% of people planning to spend more on home renovations may be driven by the strong easing off of plans to travel both internationally and domestically, and thus some freeing up of lump sums, which may partially be put to good use elsewhere.
This is unlikely to turn into the situation we saw during the pandemic, when the sheer impossibility of offshore travel saw wholesale reallocation of funds towards improving one’s nest. And this is certainly not going to turn into the low-interest-rate-driven splurge on buying each other’s houses as happened back then.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
