If we were looking for further evidence that the housing market is coming to life, it has been provided by the latest Reserve Bank mortgage figures.
According to the RBNZ's August figures for new mortgages, the amount of money advanced rose by over 8% on a seasonally-adjusted basis.
The $5.782 billion worth of mortgages committed to in August 2023 was up from $4.997 billion in July 2023.
More significantly than that though, it was up 6.8% on the $5.413 billion of mortgages committed to in August 2023.
We need to stress that all these figures are coming off a low base - the figures in July 2023 were, for example, the lowest mortgage figures for a July since 2017. But nevertheless, there are clear signs of a rise in activity, even though the election is just around the corner.
And the RBNZ says it is the first time this year where we've seen a month in which the total of mortgage commitments has actually been higher than the corresponding month of 2022.
These latest mortgage figures from the RBNZ very much back up the rising activity trend that was shown in August housing sales data.
The RBNZ said a monthly and annual increase was recorded across all borrower types in August 2023.
Lending to first home buyers rose to $1.368 billion (up 10.5% from July 2023, and 21.7% from August 2022), lending to other owner occupiers rose to $3.34 billion (up 17.5% from July 2023, and 0.6% from August 2022), and lending to investors rose to $986 million (up 15.6% from July 2023, and 9.0% from August 2022).
The share of new mortgage commitments to first home buyers fell slightly to 23.7%, down from a record high of 24.8% in July. However, the RBNZ said this is still 2.9 percentage points higher than in August 2022.
Okay, that's the money, but what about the numbers of mortgages?
Well, the RBNZ said there were 15,952 new mortgage commitments by NZ registered banks in August 2023, up 15.6% from 13,795 in July 2023. In comparison to August 2022, the number of new mortgage commitments has risen by 5.6% from 15,109. These increases were also reflected across all borrower types.
The average value of new mortgage commitments across all borrower types rose to $362,500 in August, up slightly from $362,200 in July. The average value has risen 1.2% from $358,300 in August 2022. The average value for first home buyers was $551,400, down 2.0% from July 2023 and 3.0% lower than in August 2022.
So, spring has apparently sprung, as these mortgage figures back up what the general signs of activity in the housing market were showing us.
Economists have already been upgrading their forecasts for how the housing market will perform for the rest of this year and into next.
The economists at the country's largest bank ANZ, for example, have already raised their forecast of house price rises for the second half of this year to 4%.
What the RBNZ might make of all this will be of keen interest.
The central bank is having another review of the Official Cash Rate next week. Since its last OCR review in August the RBNZ has been confronted with evidence both that the economy is performing more strongly than expected - with GDP rising in the June quarter by a more than expected 0.9% - while the housing market has looked to be picking up more quickly than the RBNZ might have thought, although it did upgrade its housing forecasts at the August OCR review.
It will be though of some considerable interest to see if the RBNZ makes explicit reference to some of this stronger than anticipated activity in its review next week.
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Everyone in NZ thinks they are a property genius, I got lucky too. Planning a windfall profit is bad business. Acumen my arse. I invested my ill gotten gains into businesses that pay me income with a healthy compounding profit margin every single day. If you want a recipe for real sustainable wealth, thats it.
I agree. He is very short on details about these "businesses" too. Did he just buy shares? Businesses often plan on a big windfall, never making a profit and then getting big bucks when they sell. Property "windfalls" are often just 5-7% per year over many years making it look like a windfall when that is hardly the case.
BNZ upping rates:
https://i.stuff.co.nz/business/money/300978243/bnz-increases-home-loan-…
There's obviously lots of people with too much cash or are simply too dumb.
Best wishes.
Serious question, where are people getting all this money from? And how are people able to afford it? How do they even get banks to lend over a million bucks unless your household income is 250k+?
Or am I just a bogan not knowing that people out there are in fact very well off?
Who said you need a household income of 250k plus? There is a lot of lending under 20% and even up to 5. People have savings, suggest you join the NZ first home buyers Facebook page and have a look around. A lot of them have above average incomes and savings which to be honest have surprised me a little. Secondly, there is a shortage of listing, hence competition and the urgency. The tota opposite of last year. I see you’re calling people dumb, just curious - do you own or rent?
Its not all DGM.
Yes I don’t really understand it either. Especially re: FHBs who can’t leverage off equity. I suspect the bank of mum and dad is a very significant factor. Mums and dads in their 60s with heaps of equity. After all, even many middle income households who bought 30-40 years ago will have heaps of equity.
More sales doesn't imply anything about values, of course. It may be that sellers are lowering their expectations, along with buyers believing we are near the bottom. Relative price stability over the last few months suggests as much.
What will be interesting to see is whether these numbers continue over the next few months. Recent interest rate news suggests not. Rather, what we have seen lately is probably a temporary blip, and downward price trajectory is likely to continue and perhaps accelerate.
It’s an interesting point. Many oldies around age 80-85 would have built up big equity over the past 30 years, they die and younger boomers and Gen X’ers inherit that. The boomers, many already with plenty of equity, get their wealth bolstered…. More ability to then help their children….
This might be playing out as a significant factor
I think the slight rise we have been seeing is a mix of improved sentiment and immigration. But how long can this combat rising, higher-for-longer interest rates? I don't see the property market roaring back into life any time soon.. despite what bank economists say..
Wow, high LVR lending is almost back up to 2021. Hope everyone realises this a very speculative bet that interest rates will go down sharply. Not having a 20% deposit makes it really easy to justify throwing you under the bus, if things get tougher.
That, National is going to restore housing market narrative, working overtime.
I may be wrong but it seems to me the last month or so the major factor is a particular breed of FOMOers- people feeling this is their last chance to buy before what they think will be National and co supercharging the market again through policy changes. That urgency to buy combined with sellers similarly putting off listing till same changes has made for a temporary change in supply and demand. I've heard FHBers expressing this sentiment.
Maybe.
But for now plenty of new houses are being completed (the surge of completions will start dissipating). Unemployment will tick up, less migrants will arrive, some may need to leave. Remember that many of the immigrants have come in to roles in industries that are vulnerable- house building, hospo, retail, tourism.
After languishing in the mid 300s for quite a while, townhouses for rent in Auckland are back over 400.
I'm tending to think over multiple years. There will be a significant void in new houses in the next 2-3 years, and what has been built up until now has barely (or not even) covered existing demand - still not a lot of houses for sale.
Unless the global economy shits itself for the next 5-10 years, it's fairly likely new house demand will exceed supply.
I'm on the fence about all construction hitting the wall, because there's so much undersupply, and non-residential building isn't as skitterish as house building.
My Rona prediction was:
- lots of supply shortages
- labour shortage due to halted migration
- "emergency" lending rates will go away, to coincide with economic downturn
- migration to resume
- central authorities resume money printing, large upswing due to prevailing economic downturn
I didn't fully predict how expensive things like houses, boats and cars would get, because I assumed more of the population would recognise how expensive it'd be to shut down the global economy on and off for 2 years, and exercise greater fiscal caution. Or Russia invading Ukraine.
Commercial construction forward workload stacked for next 1 - 2 years, clients pushing go on projects now (in the BOP area). Breaking ground on 2 or 3 new sites in October, with 3-4 more programmed for Feb.
Developers who are hesitant here now will be struggling to resource certain projects for next year, and all the good deals with desperate suppliers have already been done over the last 6 months.
Tender market has picked up considerably compared to this time last year, +50% at a guess.
Pretty similar to where I am from the sounds of it. A bunch of commercial/industrial projects were paused in 2020 due to covid, so those are onstream now, plus there's a catch-up to do from projects that weren't being planned over 2020/21.
Might be different in retail and commercial office, not sectors I touch in recent years.
"The average value of new mortgage commitments across all borrower types rose to $362,500 in August, up slightly from $362,200 in July.
The average value has risen 1.2% from $358,300 in August 2022.
The average value for first home buyers was $551,400, down 2.0% from July 2023 and 3.0% lower than in August 2022."
And that's all you need to know. Read it again.
More mortgages but the values are pretty stagnant.
In fact - strip out the upper end mortgages and business mortgages - and the average value of each new mortgage could have fallen more.
Possibly a blip caused by the RBNZ dropping LVR ratios a tad?
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