Credit bureau Centrix says it has seen an increase in mortgage enquiries since the October 14 election, suggesting this might be due to the expectation the new government will restore mortgage interest deductibility for property investors.
In its October Credit Indicator Centrix says whilst mortgage demand is down 8.8% year-on-year, there has been "an upswing in enquiries" since the election result.
"This could point to the expectation the new government will restore mortgage interest deductibility for property investors," Centrix suggests.
The National Party is set to form and lead a new government after the results of special votes are released on Friday, November 3. At the moment interest deductions on residential rental properties are either fully denied or are being phased out. National wants to restore interest deductibility via a "phased in" basis meaning:
- 50% interest deductibility would be kept from April 2024, instead of being reduced to 25% in line with the current interest limitation rules;
- 75% interest deductibility from April 2025; and
- 100% interest deductibility from April 2026.
Kelvin Davidson, CoreLogic NZ's Chief Property Economist, has suggested, however, the idea this "would open the floodgates for investors to purchase again is probably wide of the mark."
Centrix says 1.25% of home loans are in arrears.
Meanwhile, Centrix says overall debt demand rose 5% year-on-year in October, above the 2019 pre-pandemic level.
"Leading the group are auto loans, with year-on-year demand up 14.4%. Additionally, year-on-year demand is also up for retail energy (+9.1%), credit cards (+7.2%), personal loans (+7.0%) and Buy Now Pay Later products (+2.9%)," says Centrix.
Consumer arrears rose to 11.70% of the "credit active population" in September, from 11.62% in August, with the number of people behind on payments at 427,000.
"These arrears levels are up year-on-year (+10.0%) and tracking closely to levels recorded in 2018. It’s important to remember these figures are coming off historic lows recorded since the April 2020 COVID-19 lockdown. There are 162,000 consumers currently 30+ days past due. Within this subsection, 107,000 consumers are recorded 60+ days past due," says Centrix.
Additionally Centrix says company liquidations rose 40% year-on-year in September, with an 87% increase in the retail sector, and a 57% rise in the construction sector.
"We’ve seen credit defaults climb across the board in September, particularly in the property and retail spaces, which could be an indication of further hurt in the future."
4 Comments
No one can say they didn't see it coming in the construction sector. The writing's been on the wall for the last 18 months. With consents continuing to fall it's only going to get worse. Add to that more interest rate rises killing demand further. Not a good combination of fundamentals at the moment.
The likes of Fletchers will continue to take market share since they have the deepest pockets. Their outlook is surprisingly positive.
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