Rental squeeze has only just begun -A ucklanders paying thousands o fd ollars mo rea year
Rents in Auckland were u p8 .5% year on year, according to the latest Stats NZ data. Photo / Ted Baghurst
1. Rents still rising
The latest Stats NZ figures duly showed tha tr ent alg rowth remained strong in October. National rents (on the ne wt enancy/flow measure) have ris enb y6. 1% in the pa sty ear, still roughly double the long-ter ma verage growth rat eof 3.2%. Auckland (8.5%) and Canterbury (6.3%) wer efa ster than the national figure, although Wellington was more subdued (-0.2%). Rental vacanc yr emain st ight, wit ha vailable supply ofp roperties low and demand high, on the back of strong net migration. Hence, more rental increases look likely in the coming months.
2. Migration still rising
Speaking of migration, Stats NZ reported la stw eek that around 118,000 people left NZ in the pa sty ear (a record), but also that around 237,000 people arrived (als oa record) – and the net result is ano verall migration balance of roughly 119,000 ,a record too. So basicall yt her ea re people moving all ove rt he place, bot hinando ut ,b utt he big pictur ei st hat our overall population i s st ill growing quickly (despit elo sing alo t of NZ citizen st o Australia). That is sure to be boosting the housing market, particularl yr ents in many of the main centres.
3 .Sa les volum esa ls ou p again
Our latest figures ,co vering activity via bot he state agents and private deals, sho wt hat property sales volume sr os eb y 13% in the yea rto October, the sixth increas eina row. However ,al though the turnaround for national sale sv olumes has no ww ell and truly arrived, the trend i sst ill a little inconsistent and patchy across regions. Moreover ,i t need st obe noted tha ts ale sv olume sr emain very low. Indeed, the nationwide tot al o ver the past 12 month s st ands at only 63,919, still onl yr oughly in line with the low-point of the GFC. It’s going to take a fe wy ears ofp retty solid growth t oge t back t oamo r eno rmal annual sale st otal of 95,000.
4. High mortgage rates are
currently capping debt to income ratios
The latest Reserve Bank figures sho wt hat only about 1% of first home buyers and 8% of investo rs s ecured amo rtgage at a high deb tt o income ratio (DTI) over Jul yt o Septembe rt his year –in this case, ‘high’ is measured at a DTI of sev eno r above. That’s a far cry from the peaks back in 2021, especially for investors, with 35-40% of them taking high DTI mortgages tha ty ear.
Man yt hings have changed since then, including ris ka ttitudes from bot hbo rrowers and banks ,no tto mention that lower hous ep rices simply mean that less debt i sr equired anyway. Higher incomes also help. B utt he key factor in limiting high DTI lending ha ss imply been the rise in mortgage rates, which naturally reduces how much debt can be approved/serviced fr omagi ven income.
I tw ouldn’t bea surprise to see high DTI lending remain subdued for a while yet ,b utt he Reserve Bank may well still choose to impos efo rmal caps on DTIs in the second half of ne xty ear, t oge t ahead of t he c urv efor
when mortgage rates doe ventually sta rtt o fall again. Formal caps on DTIs will tend to limit how many properties an individual can ow no ve rt he medium term (let’s say periods of 5-7 years) and dampen long-ter mho use price growt ho ve rt he c ycle too.
5.S low turnaroun df or mortgage lending?
Staying wit hmo rtgages, the
Reserve Bank will publis hOc tober’s
aggregate lending figure st his
Friday, which ma yw ell sho wt he continuation of a slo wu ptur nfo r loan activity across new mortgages, topups, and bank switches. As ever, the breakdow nb y loan to value ratio will als obein teresting, especiall ys ince
September’s low deposit lending flo wss oftened a bit. - Kelvin Davidson is chief economist at property insights firm CoreLogic