Growth in the country's stock of outstanding mortgages has been the slowest in the first four months of this year since the comparative periods during the post global financial crisis (GFC) years.
This news might not surprise those who have been keeping up to date with our regular monthly reports on new mortgage lending.
It's always worth having a bit of a dig into longer time periods and trying to put some historical perspective on figures, however.
And putting the current mortgage data through a historical lens doesn't produce any better picture than you might imagine. Arguably it's rather worse.
As previously reported, the Reserve Bank's latest sector lending figures covering up to April 2023, show that in the 12 months to April the annual growth rate of New Zealand's total outstanding stock of mortgages (3.2%) was the slowest since late 2012. The growth in size of the mortgage pile (which is now over $348 billion) was also the lowest for an April month since 2012 - if we exclude April 2020 in which the mortgage pile actually shrank because we were all locked up.
I thought it was worth having a bit of a crunch at the numbers for the first fourth months of the year (IE a third of the year) and comparing those historically.
As we know the RBNZ has been introducing a whole new range of data series in recent years and there's some very fine and increasingly granular figures being produced. Some of this data doesn't go back many years though.
However, the housing mortgage stock data goes back nearly a quarter of a century. So, I wanted to see how the first four months of this year compared with the first four months of all the years going back to 1999.
In the four months to the end of April 2023 our mortgage pile grew by a little over $2.5 billion.
We need to go back to 2012 to find lower numerical growth in the mortgage stock for the first four months of a year. The stock pile grew by just a shade over $1.5 billion that year. But 2012 was not in isolation. The first four months of 2011, 2010 and 2009 were all similarly slow with growth in the mortgage stock during that time of about $1 billion, $1.5 billion and nearly $2 billion, respectively.
Before those GFC years there had been some bumper growth in mortgage business. During the first four months of 2007 the mortgage pile grew by over $6.8 billion.
Prior to the GFC years we need to go back as far as 2002 to find a first four months of the year that saw lower mortgage stock growth ($2.2 billion) than the $2.5 billion we saw in the first third of 2023.
At this point it's well worth mentioning relative sizes. During the GFC years the country's total mortgage pile was less than half the size it is now, while in the early 2000s it was only around a FIFTH of what it is now. So, in relative terms we are seeing very low growth so far this year.
Bringing the comparisons a bit more up to date, the $2.5 billion in the four months to April 2023 compares with mortgage stock growth of $6.2 billion for the same period a year ago and a thumping $12.3 billion for the same period in 2021 when the housing market was white hot. And yes, that's very much the record growth for the first four months of any year.
Even the first four months of 2020, which saw the reversing-mortgage lockdown April (mortgage stock dropped by over half a billion dollars) had overall growth in mortgage stock of over $4 billion.
Looking back over the previous 10 years before this one, the average growth in mortgage stock for the first four months of the year was over $5.3 billion - compared with $2.5 billion this year.
And yes, averages can be inflated by a big outlying figure. So, if we take out that monster $12.3 billion figure for the first four months of 2021 the average for the remaining nine years comes down to a bit over $4.5 billion - which is still well north of the figures seen so far this year.
So, there were go. Our housing/mortgage market has gone from historically hot to historically cold.
Will it take as long to warm up again as it did after the GFC? Time will tell. No predictions here.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
71 Comments
I cannot remember where I read the account, but the author made reference to a pre-literate society who upon marrying husband and wife, communally (will I get labelled ‘pro-Stalinist for this mention?!) would construct a new shelter for the young couple, who then are able to get on with life.
Apparently this practice was common place in such ‘primitive’ societies, all around the world.
In the Anglo sphere (and no doubt other counties too), where housing speculation is rife, we’ve got it all the wrong way around.
A young member of that society is expected to thrive and prosper, before acquiring a permanent shelter.
Humans though, do not thrive without their basic needs being fulfilled. And today, in NZ of the 21st century and elsewhere in the world, it shows; Look at the numerous societal issues, look at the mental health stats, crime and declining fertility rates. They are symptoms of a society that is unable to fulfil the basic needs of its citizens. We are simply not looking after ourselves properly, both from an individualistic and collective point of view… we can do so much better. (And I’m not just advocating for more ‘dole’ but to have the tools and the basic means to thrive.)
Now a cooling mortgage market is perhaps a sign that the bloated housing market is starting to correct. But I don’t think it’ll be enough. I think the collective mentality has to move away from the obsessive thinking of housing as speculation and towards thinking of it like we do of air, water and food - a basic human need. We are a long way from that.
I’m not optimistic though. If the bottom of the boom/bust cycle is reached, we’ll probably allow corporations and cashed up individuals to buy cheap houses en masse and the dehumanising boom cycle will repeat.
Am I mistaken?
It is crazy but not entirely so.
Those who contribute most are doing fine.
Those who learn at school and are willing to work hard or go overseas to start with - with highish paid jobs can generally afford to buy houses without too much stress.
Those who choose not to go to uni, dont acquire valuable skills and/or choose not to go overseas.. will struggle.
The problem is also intergenerational in that parents who worked hard and bought houses can afford to help theit kids.. but those kids are more likely to also be the go getters and work hard anyway so will prosper
For me the problem is primarily that where parents arent bothering... we arent pushing their kids harder to get a decent educations so they can get ahead. For that we need to invest in the best teachers.. which should be priority #1.
Noone gave me anything.. but i got the education done and worked hard and travelled.. and everyone young and old i know who pushed.. did well. Those who chose not to.. less so.
Doesn't matter mate, how many now go to Uni just for the fun of it and dropout after 3 or 4 months ? Young people attitudes these days are stuffed, see it all the time and quite frankly I'm sick of it. All expect it handed to them on a silver platter and never stop complaining. Its the parents fault really, the so called "Boomers" gave them to much and now its all just expected as the "Minimum" and they have gone from silver to the gold standard.
Boomers? Feck sake! The ,"groovy Gen YXZ set" with their cinos , lame tattoos, and teleban beards are their kids "besties!"...
FFS they don't know how to say No and their spoilt " cafe culture" ankle biters are just little spoilt Clive Hunts
These kids are as shallow as Kim.con.s spa pool after he has hopped out?
The world is already Fecked thanks to lame woke democracies softly softly approach. regimes like Putins Russia are China are just sitting back laughing at the wests stupidity!
You then get the Gen Z who learn they don't need to go to Uni as they can just move to Wellington or Auckland, learn to negotiate well in relation to employment contracts, and move jobs every 2 years to get a healthy salary by mid-late 20's where they have salaries well above what I would imagine is a reasonable proportion off our population. Does this encourage needing an education or does this encourage thriftiness and perserverence? To see people in their early 20's getting entry level roles at ~80k/year salaries.....and we wonder why there is low productivity in NZ.
Because we don't invest in productivity, we invest in the same house over and over again until those young people need ~$60-70k salaries just to pay rent and get by. Meanwhile older generations berate them for having "high pay" while it buys them one half the rent or one quarter of the house that it could have only 10-15 years ago.
If you're 18 and looking at becoming a professional anything, you look at the salaries and what life might be like living off that salary. What's the outlook for these young people if they come out of uni with a mountain of debt, can't afford to support a family, can't afford to even save for their own home without risking their savings investing in volatile asset classes. Even a couple on $150k shared with a couple of kids are likely scraping by if no assets owned.
Good for them if they are able to go out in the real world and negotiate their skills and maintain a well paid job. The flipside is the coddled university student who struggles outside of the academic environment and is unable to get going in life - they exist also. Uni is no guarantee of anything with exception to a few vital degrees - even then, would you study for four years to earn nigh on minimum wage as a nurse?
Tim Minchin wrote the below, relevant.
3. Remember, It’s All Luck
You are lucky to be here. You were incalculably lucky to be born, and incredibly lucky to be brought up by a nice family that helped you get educated and encouraged you to go to Uni. Or if you were born into a horrible family, that’s unlucky and you have my sympathy… but you were still lucky: lucky that you happened to be made of the sort of DNA that made the sort of brain which – when placed in a horrible childhood environment – would make decisions that meant you ended up, eventually, graduating Uni. Well done you, for dragging yourself up by the shoelaces, but you were lucky. You didn’t create the bit of you that dragged you up. They’re not even your shoelaces.
I suppose I worked hard to achieve whatever dubious achievements I’ve achieved … but I didn’t make the bit of me that works hard, any more than I made the bit of me that ate too many burgers instead of going to lectures while I was here at UWA.
Understanding that you can’t truly take credit for your successes, nor truly blame others for their failures will humble you and make you more compassionate.
Empathy is intuitive, but is also something you can work on, intellectually.
You were incalculably lucky to be born, and incredibly lucky to be brought up by a nice family that helped you get educated and encouraged you to go to Uni.
The best academic learnings I gained were not through university. I have done a MOOC (free without the certificate) on data analytics using R (open source software) that was far more valuable that what was on offer at any NZ university.
The Tim Minchin writings in my opinion is just word salad. Especially when your told oh "you were born in to a bad family, you have my sympathy but your still lucky". What sanctimonious nonsense.
I think many would like to give a swift kick in the privates and then tell him 'I know it hurts, you have my sympathy but your lucky that you have privates.."
Of course there is a degree of luck but most that succeed is because of hard work and persistence. Basically doing things you would rather not do.
Hard work is all relative though isn't it? Working hard whilst living in a stable home with financial resources is infinitely less challenging than working hard whilst living in a cold damp home, not knowing where your next meal is coming from and living with the constant fear that your abusive drunk/drugged father is going to beat the sh%t out of you and your siblings.
Reminds me of Arnold Schwarzenegger's commencement speech at the University of Houston in 2012.
“I didn’t make it that far on my own. I mean, to accept that credit or that mantle would discount every single person that has helped me to get here today — that gave me advice, that made an effort, that gave me time, that lifted me when I fell. It gives the wrong impression that we can do it alone. None of us can. The whole concept of self-made man, or woman, is a myth”
I get most of what you are saying... but why do we have to push our kids to their academic and vocational limits so that they can buy a house? Isn't it on us to give them options? We need to figure out a lower entry point for the next generation so they don't have to load up on a crippling mortgage. There has to be a property ladder... it's what's missing in NZ. Apartments are a great solution overseas but they don't work over here for whatever reason.
Apartments don't meet the "Gold Standard" of living over here, but to be fair our building standards have been so poor that leaky apartments where your upstairs neighbours shower starts coming down your walls while they use it have occurred. The upstairs apartment turned out to be a bit of a err brothel so you can just imagine how much that shower got used. We simply don't build decent apartments here, it's hard enough to get a decent house and at least you can do a full building inspection on something stand alone.
Zwifter- you've hit the nail on the head. The apartment industry has been stigmatized by poor design and quality. I'd like to see us continue to try though... some fabulous liveable apartments overseas. Lol... the brothel upstairs...!! I was thinking more along the lines of the NY stuff you see on Friends
Apartments don't meet the "Gold Standard" of living over here, but to be fair our building standards have been so poor that leaky apartments where your upstairs neighbours shower starts coming down your walls while they use it have occurred.
After the bubble burst in Japan, the construction quality improved dramatically. Why?
1. People would not buy any property at any price. The value quotient became more important.
2. Japanese companies such as Sekisui started developing advanced construction materials. Companies were forced to bring value to the market for their very survival.
3. To compete in a deflationary market, developers needed to up their game. Not just on the qlty of the product and service, but also on the profit margin they received for their efforts.
NZ is so far behind.
To those who argue along the lines of, “Take responsibility of looking after yourself in regards to basic human needs instead of complaining,” I actually agree with you… to a point.
When discussing needs such as air, water, food, social connections etc, there is much you can do to help oneself.
So, I choose to eat healthily, exercise daily, sleep correctly, see friends etc etc. I have control of these factors that contribute to human wellbeing.
I cannot however control the factors that contribute to an unhealthy, over-inflated property market. I’m invested in it - renting or buying - whether I like it or not.
Alternatives exists, such as house-sitting full time (which I’ve done pre covid), or living in a van, but it’s no way to raise a family of which I now have.
I feel strongly against our vicious housing bubble because unlike tulips or South Sea shares, many folk cannot opt out, to the collective detriment of many.
Exactly. Shelter is a basic human right, part of Maslow hierarchy of needs.
But here it’s become a circle jerk for boomers and assorted leeches to congratulate each other on how well off they are and what savvy investors.
Now the tide has gone right out and the tsunami is about to come in we’ll see how savvy they really were.
Human right!? Feck off! Nothing is a hunan right... a human need maybe.
Nobody has the right to demand what they want!
Is sky tv or KFC or a Harvey Davidson a human right.. well according to NZ politicians it is or they would not allow you to own one while on a benefit
If shelter is a human right then are cars or bridges/ underpassses shelter and if not why not.
The only human right is "people can choose how the want to live."
Bob Jones clarifies the stupidity of human rights BS....
https://nopunchespulled.com/2023/04/14/more-hitherto-unknown-human-righ…
https://nopunchespulled.com/2022/10/31/ficticious-human-rights/
Then there is the ĝoing green paradox effect of globalization on human rights of lithium farmers in indigenous regions.
Is it s human right to own an EV? And have indigenous people human rights ( lithium miners traditional land usages) compromised.
https://scitechdaily.com/when-going-green-goes-wrong-the-human-rights-p…
In 1893 Oklahoma had a land run into savannah lands for people to secure their own 160 acre property. It was a way to populate the area but gave people a basic property holding. They had to stay there 5 years and not leave for more than 6 months at a time.
Woke 'aotearoa' NZ would never do this
We need an upswing in property prices and with that an upswing in mortgages. Time to lower interest rates and for banks to be less pedantic with handing out loans. Otherwise this might lead to collapse of the ponzi. A continuation of fresh money from the bottom to feed the top.
Not to worry! The property Market turnover is about to perk up as mortgage and CPI rates start to rise and serve to convince the unconvinced that prices are about to keep changing. And UP isn't it.
Saudi Arabia slashes oil production and threatens to do 'whatever is necessary' to boost prices
I am surprised anyone can even afford to buy at these prices and interest rates. How did that number even come into billions??
Any FHB buying now in falling market are risking their down payments into a disappearing act. The more the value of the house goes down everyday, it's your down payment which has disappeared. the bank will still want the interest and mortgaged amount from you.
The greedy are still wanting more and more for their shacks. And the leeches of this country, RE agents are just so slimy and lying their way into making gullible buy in this falling market.
Most people can't afford it. Affordability is about more than just your ability to meet the monthly mortgage payments for the duration of your first fixed term, which is about all anyone ever takes into consideration these days. It's about the ability to weather illness, redundancy, separation, living cost increases, interest rate rises, house price falls, recession, the list goes on. If any of these things spell financial disaster for you - which for many mortgaged households it will - then no, you can not "afford" to buy your own home.
'Only 1% of Australian taxpayers own nearly a quarter of all property investments across the country, amid concerns over escalating rates of wealth concentration'
I wonder how this compares to NZ?
Periods of high wealth concentration and inequality generally lead to social and financial instability - bad things for a capitalistic system to thrive as it results in increased lawlessness and difficulty maintaining property rights. Why? Out of desperation, poor and marginalised citizens will do anything to try and survive while the wealthy have more than what they need.
You are right, but it has more to do with experience and education than anything else.
Many less experienced will always be waiting for the market to fall further or a crash happen. Only finally acting when the next up cycle becomes obvious. But the more experienced & established know this is not the right strategy and act smarter during these rough times.
It’s during the tougher economic times that the decisions are made that make the rich richer.
I know several big property holders who have sat on their hands waiting over the last few yrs retiring debt. Doing existing properties up etc. Saying you would be a fool to buy into this red hot market. And when it turns will get back in the writing was on the wall in Auckland and Wellington anybody with half a brain could see that. But as Warren Buffet says when he buys an asset he buys on the assumption that the stock market shuts down for ten yrs and he is unable to sell the recently brought share.
Eventually you could end up with one of these. Whether it be state sanctioned or a serfs uprising.
Landlords — whose status was theoretically defined through the percentage of income derived from exploitation as opposed to labor — had their land confiscated and they were subjected to mass killing by the CPC and former tenants,
Periods of high wealth concentration and inequality generally lead to social and financial instability
Enter the boom and bust capitalistic anglosphere, where wealth accumulates to the top as corporations buy up more corporations until the 1% have everything and the rest revolt from fighting for scraps.
We seem to have forgotten the saying "it takes a village to raise a child" and instead gone with "go away and raise your own child. If you can't afford to, go to WINZ".
Help your neighbours, invest where you can in something other than property, give your time to others where you can, and vote anyone but Labour or National.
surely this is good news --- and long may it continue -- in fact ten years of a static number here might make housing affordable again -- sadly -- Labour has opened the borders to more people than ever before -- and just as we finally started to catch up with housing Boom another 100000 people are arriving this year -- and its not just housing -- our healthcare system cant cope today -- we are clinging on by a thread and 100,000 extra people - virtually none being nurses - crippling
Happy to see this housing number actually drop if possible!
From the investors page on Facebook…65 thousand members. Ross Barnett who posted this is a chartered accountant I assume….getting desperate I sense. Building a practice around loss making businesses might not seem the smartest thing in hindsight.
”
Cashflow is terrible at the moment for a lot of property investors. Can we try to help property investors who are struggling with some simple ideas to improve cashflow over 1-3 years.
Can we number the ideas and try not to double up on the items already covered.
1) Review rent and have a strategy around rent increases. Obviously extra income coming in helps with cashflow, but it is also a balancing act with tenant retention.
This is getting more serious regarding the anticompetitive nature of their site.
Property Investors Chat Group NZ
Some other memorable recent posts, “if I renovate and want to increase rent, do I go straight to winz with the increase?”
Couldnt make it up if I tried.
To be fair, the majority of posts are just asking for advice on how to manage situations. Some real gems though
How is saying “increase prices” anti-competitive? In order for it to be anti-competitive, a number of landlords in the same market - that is, similar area and property type - would have to agree not to reduce rents or set rents at a particular level. You could use that “suggestion” for any business looking to improve cashflow.
If 65,000 .. or 1,000, or even 10 .. landlords decide en masse they need to raise prices in concert - is this not cartel behaviour? Deciding independently is one thing, but as an organised co-ordinated cohort?
This is exactly what the property agents in Hamilton were fined for (acting in anti-competitive manner by agreeing not to undercut each other) - though the companies involved were commercial enterprises, rather than the 'club' you could possibly call the FB group.
I don't see CC taking a huge swathe of landlords who have agreed they must all rise prices to court - esp. when the evidence is, they either need to raise or sell up.
If only more tenants paid attention to the tribunal rulings around rent increases due to landlord cost (interest increases and deductability removal) increase... and just said 'no, that's not lawful - lawful is market rent, not your costs'.
If 65,000 .. or 1,000, or even 10 .. landlords decide en masse they need to raise prices in concert - is this not cartel behaviour?
Yes, it might be. But that’s not the case here. It’s just a suggestion that a landlord, whose cashflow is problematic, could consider.
Especially if it was coordinated well enough. For example, tenant stops paying rent but holds the rent in a savings account. They're given a tenancy tribunal hearing date in 4 month's time, let's say 6/10/23.
So on 3/10/23 the tenant lump sum pays the rent. And in that time may have alternative accommodation lined up should the hearing result in eviction. As you say, how long can the bank wait?
I've long thought a co-ordinated rent strike is needed in this country to get the government to listen to the demands of the 'have nots'.
I've also written several times asking for rent caps at a small % of RV per year.
I also made submission in the 2019 RTA reform that rent increases should be made illegal - except in the case where rent was temporarily dropped for maintenance/improvements.
I also made submission re: discrimination on pets and kids (yes, discriminating against kids is illegal, but it happens and even if you proved it [I have a written email from a prospective landlord, for example] - what good would it do?).
Tenants are an incredibly large voting bloc, but they are ill-represented in government - it seems nearly every MP either had a silver spoon on the way, or forgot their roots, once they started collecting their fat tax-payer-funded salary.
The problem is - could I lead by example? Would I be willing to risk my families shelter (I'd just hold the rent) on the likelihood that enough others would join me so that the tenancy tribunal is choked to a stop? It wouldn't take many to do that, but it would likely take tens, possibly hundreds, of thousands to get those in government to listen. And I'd expect to be arrested for anarchism or anti-social behaviour, or some other trumped up charge, were I to try to organise it. Which doesn't help my family at all.
Rent strike needed: yes. Practical: not really.
Continuously selling a product at a loss is also anti-competitive conduct, so if a large group of investors are now offering rental properties at a price less than it costs them they should immediately be forced to raise rents so that they are not predatory pricing. Would you prefer that?
"Continuously selling a product at a loss is also anti-competitive conduct, so if a large group of investors are now offering rental properties at a price less than it costs them they should immediately be forced to raise rents so that they are not predatory pricing. "
FYI, predatory pricing is when the gross margin is negative.
For most buy and hold property investors:
1) the gross margin is positive, and there is positive gross profit
2) the EBITDA margin is positive, and there is positive EBITDA
3) the EBIT margin is positive, and there is positive EBIT
The service business is profitable and not being sold at a loss.
A 100% equity financed (zero percent debt financed) property investor is operating profitably.
The reason that the long term rental business is operating at a loss for many in the long term accommodation business is due to the level of debt used and the cost of financing.
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