Property and Lending updates

ANZ Property Focus

ANZ Property Focus assesses the state of the property market in New Zealand, providing investors and prospective homeowners with an independent appraisal of recent developments.

May 2022: Better fundamentals mean softer prices (PDF 1.58MB)
Two big events have taken place since our last edition: The RBNZ hiked 50bps on 25 May (as expected), and lifted its forecast for how much higher the OCR will need to go (that was more of a surprise); and the Government released Budget 2022, which included another increase in government spending. We have since tweaked our OCR forecast to be slightly more front loaded. While we continue to expect it to peak at 3.5%, we have also centralised some of the downside risks we are seeing to our (still very uncertain) house price outlook. We now expect house prices to fall 11% in 2022 (previously -10%), with a much soggier recovery thereafter. The latter reflects very solid progress in recent quarters towards addressing NZ’s housing deficit.

April 2022: Regional rollercoaster (PDF 5.91MB)
This month we take a look at housing market developments across 14 key regions. While the house price cycle has been broad based, there are some differences between regions when it comes to the magnitude of price gains over the past couple of years. We evaluate regional house prices, indicators of housing market tightness, key regional economy indicators, and regional measures of housing affordability. Where does your region sit? Wherever you live the answer is likely to be “on a cooling trajectory but less affordable than before the pandemic”. See this month’s Feature Article.

March 2022: A soft landing as headwinds gather (PDF 1.61MB)
Recent housing data have come in broadly in line with our expectation. Looking forward, our call change for more aggressive OCR hikes and a higher OCR peak have translated into an even softer outlook for housing. We now expect house prices to fall 10% in the year to December (previous: -7%). With CPI inflation intensifying, it’s our forecast that the RBNZ will continue lifting interest rates even as economic momentum (and housing) fade. That’s a dynamic that may surprise some kiwis, but central banks must defend their inflation targets (and credibility) at all costs. It may not take much for our expectation for a relatively soft landing in housing to surprise on the harder side.

February 2022: At your service (PDF 1.50MB)
How much will OCR hikes hurt household balance sheets? The answer to this question is a function of three key factors: the degree of interest rate rises, growth in household incomes, and growth in household debt. We put all these together on a path consistent with our broader economic outlook to investigate the likely looming change in household debt burdens. There are certainly tougher times ahead for borrowers, but based on our forecast for a 3% OCR, we don’t yet see flashing red lights. However, our aggregate analysis likely understates debt concentration risks. That is, there are a lot of highly indebted recent first home buyers out there who will feel the pinch of rising rates a lot more than the average mortgage borrower.

Bluestone Quarterly Lending and Property Snapshot MAY 2022

Home lending growth has slowed considerably in March and the first quarter of 2022, in line with easing housing market activity. The moderation is sharp compared to the previous year, but loan commitment growth is above levels seen in March between 2014 and 2020. A range of factors are slowing credit growth including regulators, the Credit Contracts and Consumer Finance Act, reduced housing market turnover, less tolerance for risk across banks and buyer caution. Double-digit credit growth is not sustainable. Non-banks continue to increase their market share of home lending.

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