The New Zealand housing market is now a record "seller's" market according to the latest monthly BNZ-REINZ Residential Market Survey.
And according to the BNZ, it looks as if investors could be set to become the main drivers of the housing market.
The survey came out on the same day that the latest REINZ monthly figures again showed strong house price inflation both nationally and in the super-hot Auckland market.
The heated state of the market has been of concern to the Reserve Bank, which is introducing "speed limits" on high loan to value lending from October 1 in an attempt to protect financial stability and to partially rein in prices - particularly in Auckland. See here for articles on LVRs.
'No good news'
The September BNZ-REINZ survey, which attracted 418 responses from estate agents "contained no good news for buyers", BNZ chief economist Tony Alexander said. (See here for Alexander's current views on interest rates and the housing market as told to interest.co.nz)
"In fact a record proportion of agents see the current market as a seller’s one and investors are increasingly becoming the driving force," he said.
"A record net 30% of responding agents feel that it is a seller’s market. In other words, buyers are queuing up and sellers can pick and choose."
Alexander said a "high" net 51% of agents felt that house prices were rising - the highest reading since the March survey.
Upward trend
"This result is in line with those for all other surveys this year but is also consistent with a clear upward trend in place since our survey started over two years ago."
Interest from investors appeared "firm" with this measure rising for the second month in a row to sit at above average levels of a net 26% positive versus a 17% average, Alexander said.
"...There is not a seasonal tendency for an increase to occur at this time of year.
"Therefore we feel confident in saying that investors appear increasingly out in force. Note however that one of our other surveys, the BNZ-Nine Rewards Consumer Trends Survey for this month showed that just a gross 5% of our 521 respondents were thinking about buying an investment property."
While agents said they were seeing more first home buyers in the market (a net 24% from 18% in August) this perception was below the net 34% average.
Investors 'key drivers'
"Therefore when one takes into account the reduction in the ability of young buyers to make a purchase caused by the Reserve Bank’s new rules, New Zealand appears increasingly headed down the same track as Australia where investors are becoming the key driving force in many markets (caused by discontent with low bank deposit rates) while first home buyers are being squeezed out," Alexander said.
A strong feature of the recent housing market has been a shortage of available listings.
The survey featured good and bad news on that front.
Sharp jump
"There has been a sharp jump in the number of agents seeing more people asking for appraisals, which on the face of it suggests more listings soon," Alexander said.
But buyers should contain their enthusiasm, he said, because the rise from a net 0% of agents seeing more seeking appraisals, to 21%, was entirely a seasonal change that was also seen clearly during 2012 and 2011.
"Therefore one cannot conclude that the shortage of listings makings things so difficult for buyers is easing."
7 Comments
When does the party end SK? Most indicators suggest we are only half way through this up cycle so still plenty of time to party.
In fact has the RB just turned up the volume?
Let's recap for the novice investors: We have no CGT, no stamp duty etc (imagining for a moment they curbed property prices). We have great tax deductability on investment properties. We have had many years of policies that have greatly limited residential development whilst increasing the cost of said development. We have a once in a lifetime plan change by way of the unitary plan soon to be enacted. Now the RB has introduced LVR restrictions and blocked out many (pesky) FHB'rs from the market.
It seems you would be crazy not to invest in property (if you can)!
So the outlook it seems is investors buying up large, prices increasing, LVR restrictions continuing and FHB'rs permanently locked out of the market. Do you want to be a have or a have not? More to the point what do you want for your kids? I think the thinking (in Auckland at least) is buy property today if you can, because tomorrow you probably won't be able to.
But the problem with an investor driven market is that it really relies on confidence. Yes - all of the factors you list suggest to any rationale thinking person that prices will be forever blowing bubbles. If the market was made up of just investors and there is a shift in confidence to negative (lets say a bank collapse, large interest rate hike or some other black swan) then the investors in the main will decide to cash out and take the gains. Cue rush to exits. The more investors, the more severe the crash can be.
For all the rationale, talk of new pardigms, perfect storm, common sense, talk of it's differnet this time, etc there are an equal number of events that have blown away the same new pardigms and left investors nursing big losses.
If you turn shelter into a market, and it's dominated by investors instead of boring people who want a home and stay there even if the price drops, well, expect to see some classic market dynamics.
There are interest rate rises on the way, hedge funds shorting Australian banks, a credible leader of a party that is committed to CGT... I wouldn't be waiting around for a collapse very soon but I defintely wouldn't be buying in now and expect capital gain. Shall I stick my neck out and call this the peak house price? Or peaky leaky house price even? I reckon it's now or in the next three months and I expect to be roundly abused if I get that wrong!
:)
The only eveidence that it's an 'investor driven market' is that the BNZ economist speculated it might be because of the new lending rules and slightly higher than usual number of agents speculate - and a headline on interest.co.nz.
If prices are going up and rents are not BH therefore concludes there's no housing shortage. It probably just means there's a shortage of owner occupier stuff and not investor property. So the reality indicates the opposite is more likely to be true - owner occupiers are driving prices up and investors are not.
Which explains Bernard Hickey's promotion of a land-tax as infinitely superior to David Cunliffe's CGT ....
... you won't have to wait for an indeterminate period before pinging these guys , you'll be picking their pockets every year , regardless of where they live ....suck the leeches say I !
Bernard's right / Cunliffe's wrong : It's that simple !
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