Politics has part in slump
The protracted nature of the coalition negotiations to form our next Government appear to have further stalled NZ’s property market, with buyer demand staying restrained right through to mid- October: in fact, a few faint signs of life are only just emerging.
We measure buyer demand by tracking the number of bank- requested valuations to support mortgage lending — it’s a great lead indicator of sales volumes and in a typical year, we’d be well into the spring lift by now. However, the reality is that nationwide valuation numbers are trending sideways ( at best) and the performance of our main centres is mixed.
Auckland, Tauranga and Christchurch remain in a weak phase, Hamilton has rebounded from a poor few weeks and both Wellington and Dunedin appear to be moving on from a pretty dire September. Given we’re already following a very weak month of sales volumes in September, October’s volumes are likely to remain low.
When we look in depth at those September sales volumes, it’s obvious how quiet things really were. Only two years ago September was very strong, the second strongest month of that year and actually the fifth biggest single month of sales volumes over the past 10 years. Nationwide there were almost 10,000 sales in September 2015. In 2016 that figure dropped 16 per cent to 8400 sales. 2017? Well, it’s dropped a further 25 per cent to a lowly 6300.
For sales activity to pick up, we need a lift in the number of properties for sale too. The good news is that it looks like we’ve moved past the low point for inventory ( the total number of properties listed for sale), with new listings finally start to increase. The bad news is that we’re still not seeing the same levels of new listings as previous years.
In Auckland, new listings are up 12 per cent over the past month but are still 18 per cent below the same time last year. Total inventory however is 29 per cent up year- on- year. This increased supply has contributed to the current slowdown ( more properties equals more choice and less pressure on prices) but once demand increases again it should provide a more balanced market enjoying natural growth.
Two notable areas that are well down on inventory compared to two years ago are Wellington and Otago, where total listings are down 48 per cent and 55 per cent respectively. Despite new listings starting to increase; I anticipate price pressure will remain in these regions until stock levels catch up.
It’s clear from both valuation and listing data there are definite inconsistencies with how various areas are currently behaving, which only increases pressure on the already heavily scrutinised housing market. Whatever the final configuration of our new government: one thing is clear — housing and its various complexities ( the inter- generational affordability debate, high- density housing, building consent shortfalls, rental warrant of fitness) will continue to be hotly debated . All I can says is: good luck to Jacinda or Bill.