The housing market is bouncing back strongly after the initial shock of the introduction of 'speed limits' on high loan-to-value lending, latest results from the BNZ-REINZ Residential Market Survey indicate.
The February results of the survey - which attracted 469 real estate agent respondents - showed a strong surge in interest from housing investors. The results also showed that the market has now rebounded into "sellers" territory, which it occupied from May 2012 all the way through to November and December last year when it swung sharply into being a "buyers" market.
And while the would-be first home buyers are still shying away from the market, the latest survey shows a considerable bounce-back from the extremely negative position revealed in the December survey.
The LVR speed limits were introduced by the Reserve Bank October 1, 2013. The move was principally aimed at ensuring financial stability after some banks had been aggressively raising the proportion of their low equity lending, but also with an eye to cooling the rising house market.
Latest Real Estate Institute figures suggest the LVR limits have been dampening particularly sales volumes, but also now prices as well.
However, most economists believe that the impact of the LVRs will be relatively short-lived, and the results of the latest BNZ-REINZ survey suggest that is becoming the case.
BNZ chief economist Tony Alexander said "all of the measures" used to gauge the strength of the residential property market improved in the latest month compared with the last survey undertaken in early-December.
"Most notably a net 5% of the 469 responding agents now feel that it is once again a seller’s market compared with a net 16% in December and 17% in November who felt it was a buyer’s market," he said.
The net percentage of agents seeing a decline in the number of first home buyers had dropped from nearly 80% readings in November and December.
"...But at a net 40% agents are still seeing first home buyers stepping back from the market."
Alexander said, however, that while what he termed the RBNZ's "credit controls" were having a substantial impact on first home buyers – there was "not much of an impact on investors".
Investors keen
"Whereas in December a net 6% of responding agents said that they were seeing more investors, that reading has now jumped to a net 21% which is above the 16% three-year average though still down from 26% in September," he said.
"In fact whereas real estate agents estimate just 16% of their sales are to first home buyers compared with 24% in our March 2013 survey, estimated sales to investors stand at over 19% from 18.5% nearly a year ago."
Alexander said in December agents were asked to estimate the proportion of their sales going to first home buyers. The outcome was 15.3% which was well down from 23.3% in May last year and 23.6% in March.
"We repeated that question this month and got an outcome of 16.2%. So perhaps there is a slight recovery happening in first buyer activity. We shall monitor this."
After recording the weakest ever result two months ago with a net 52% of respondents saying they were seeing fewer people attending Open Homes, this month a net 15% of respondents said that they were seeing more people.
LVR 'shock' fading
Alexander said this was is equal to the average outcome since the survey started in April 2011 "and tells us that the shock effect of the LVR regulations is fading".
Auction clearance rates were "sitting in negative territory" for three surveys, but this month rebounded to a net 1% of agents seeing an improvement in auction clearance rates.
"This signals to us the ending of a period when buyers were backing away from auctions," Alexander said.
There was also a strong lift in the number of agents seeing more people asking for appraisals.
This has turned around to a positive net 26% of agents seeing more people seeking appraisals compared with a net 8% in December that were seeing fewer people coming forward "leading us to comment that while the LVR rules were scaring away buyers they appeared also to be scaring sellers away as well", Alexander said.
Prices going up
With agents seeing more buyers back in the market they were also now seeing more upward movement in prices. A net 35% of responding agents said that they felt prices were rising compared with a net 13% in December and 23% in November. Before the LVR rules came in on October 1 this reading was a net 51% positive.
Alexander said given that the survey results were showing more investor interest and less first home buyer interest, "the reasonable assumption" to make was that the home ownership rate in new Zealand would continue its decline.
"Census results released last week show an ownership rate of 64.8% from 66.9% in the 2006 census. Put another way, back in 2006 33.1% of people did not own the house which they live in but now 35.2% are in that state.
"The Reserve Bank’s credit controls are working to reduce New Zealand’s home ownership rate," Alexander said.
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