BNZ boss eyes ongoing housing market growth as ANZ rival sees quiet market

Property

ANZ NZ CEO David Hisco says Auckland housing market may be in 7-8 year period where it does nothing, as BNZ rival Angela Mentis eyes continued growth of housing lending market share

4th May 19, 10:02am by Gareth Vaughan

ANZ New Zealand CEO David Hisco says the Auckland housing market may be in a seven to eight year period where it does "nothing."

Speaking to interest.co.nz after ANZ posted its interim financial results, Hisco said it's good to see the Auckland housing market has stabilised and "isn't running away from people" like it was a few years ago.

"I think the Auckland housing market has a bit of a track record of going for a run and then plateauing, maybe falling off a little bit. So maybe we're into that seven to eight year period where the market will do nothing. It's giving first home buyers more of a chance to get in which is good to see with the combination of slightly softer prices, less investors around, [and] low interest rates. [It] means first home buyers are probably feeling like they're not getting beaten up like they were," Hisco said.

ANZ is the country's biggest home loan lender with $83 billion of exposure and 31% market share.

Also speaking to interest.co.nz after their bank's interim financial results release, BNZ CEO Angela Mentis and chief financial officer Peter MacGillivray said BNZ's keen to continue growing housing market share. BNZ's share of housing market lending increased to 15.9% at March 31, up from 15.6% a year earlier. The bank's home loan book was at $41.3 billion at March 31.

"We've got quite a bit of room to increase there," Mentis said. "In terms of our mix we are the smallest retail book [of the big four banks], so I'm pleased with how we are going...We have high ambitions."

Asked whether BNZ has a particular market share target in mind Mentis and MacGillivray declined to give one.

"For us it's really the consistency of growth, there's no specific end target in mind here. But what we do want to demonstrate is that every month, every quarter, we're continuing to grow, and support our customers and support New Zealand," MacGillivray said.

Mentis' predecessor Anthony Healy told interest.co.nz in 2015 BNZ wanted to grow its housing lending market share to its "natural share," up around the 26% share of the business lending market BNZ had at the time. At March 31 this year BNZ's share of business lending was 23.6%.

The latest Real Estate Institute of New Zealand figures show sales volumes in Auckland were down 18% in March year-on-year, with the median price down $24,000, or 3%, to $856,000. Sales volumes in all other parts of the country excluding Auckland were down 10.5%. However, median house prices across NZ, including Auckland, increased $25,000, or 4.5%, in March year-on-year to a record high of $585,000. The national median price excluding Auckland rose $31,000, or 6.7%, to $491,000.

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34 Comments

by tothepoint - d… | 4th May 19, 10:28am 1556922520

A soft landing is fine.

Investors/landlords are doing pretty well from low interest rates and ever-climbing rents.

Home owners will go on enjoying the security of owning the roof over their heads.

All good. Enjoy the weekend!

TTP

by Big_Data | 4th May 19, 12:49pm 1556930944

Sorry, this isn't a soft landing. I looked at this property 18 months ago in Orewa:
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
It's a stone's throw from the beach, comprising three nice units and development opportunity out the back (1000+sm total). The overseas investor owner wanted $2.4m. I mooted $1.9m just to gauge response and he wouldn't even discuss (didn't 'need' to sell, apparently - which does make you wonder why he's selling in a down market). It's now on the market at $1.49m.

And this one, now on at $759k (needs work). RV $1.3m.That's quite a drop.
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
How times have changed.

by BuyLowSellHigh | 4th May 19, 1:05pm 1556931903

For someone with the username 'Big_Data', your proclivity to cherry-pick is surprising and unfortunate. Look at Auckland's data here instead.

https://www.interest.co.nz/charts/real-estate/median-price-reinz

by Fritz | 4th May 19, 2:01pm 1556935287

And if you understood math and/or weren't biased you would acknowledge that the median doesn't paint anything like the complete picture.

by BuyLowSellHigh | 4th May 19, 2:29pm 1556936976

Oh give me a break. Nobody claims median is a perfect measure and pointing out that it isn't doesn't make you look smart. If interest.co.nz had an up to date HPI graph I would've linked to that. HPI graph paints similar picture anyway. And if you think median data is completely meaningless, feel free to email David C and ask him to delete his graph. And while you're at it you can email REINZ and ask them to stop referencing median in their reports.

by Fritz | 4th May 19, 6:37pm 1556951861

No need to lose your cool. I was pointing out the limitations of median, and that it 'doesn't paint the complete picture'. That's a long way from saying it is 'meaningless'. But I don't think it's as meaningful as you do, clearly.

by BuyLowSellHigh | 4th May 19, 10:05pm 1556964323

I posted a link to median data without making any claim about the merits, limitations or meaningfulness of this measure in relation to others. Then you jump in like a jackass and say "if you understood math and/or weren't biased you would acknowledge that the median doesn't paint anything like the complete picture". Totally irrelevant and vacuous comment. Virtually everyone knows the limitations of median data. I think they teach it early on in high school, so maybe go find a primary school kid if you want to debate it, but I have no interest in doing so with you.

by Simon | 4th May 19, 3:10pm 1556939437

Big data, how old are you, I'm guessing just out of uni maybe - you show an advert for what is obviously a leaky home priced at land value or less considering costs of removal - when you were at primary school in the 90s lots of leaky rubbish like this was built -

Anyway another 5 years or so of flat prices in Auckland ain't a surprise to anyone, just don't get ya hopes up like bernard did in 06 when he said 30% price falls were on the cards, speculation works both ways, betting on price falls by staying out of the market is no different from betting prices will go up by buying poor yielding real estate

by Big_Data | 4th May 19, 10:53pm 1556967197

Simon, bless you. Last time someone said that to me I took it as a compliment and bought them a drink. I’m a property investor, I bought my first property in the 90s and have owned several since then, in various parts of the world. I take the earlier point well about cherry picking, however I use these examples because, based on my own experience in other bubble-crash cycles, the data is always behind what’s actually happening, and you can take a reasonable temperature of the marketplace by closely watching it yourself at the pointy end. Right now it’s a race to the bottom, and homes like these, leaky or otherwise, are leading the charge. There are plenty more I could show you, like the 5-bed in Stanmore Bay going in the mid $650s, or the approx. 200 or so in Millwater entering pricing freefall. It’s fine if you prefer to look at the macro level and there is plenty of value in doing that too - as long as we’re talking HPI. I’ll be sitting on the sidelines with popcorn to see what falls out.

by Mrs The Point | 5th May 19, 4:32pm 1557030775

Appreciate your examples Big_Data. This is an area I follow also. I watched in amazement as they were selling those ghastly terraced future slums in Millwater for close to 1 Million. I have only noticed a slight easing so far, but there is a heap of stock in Millwater and more coming on-stream. I think there will be some developers dropping their pants shortly.

by Big_Data | 6th May 19, 5:39pm 1557121189

Like the brand new 4-bed on the market at Milldale for $925k? I guess that could count as a pants-dropping, although in my view these homes are all still insanely overpriced, even since the declines started. I guess that's what happens when your new home purchase is subject to lower LTV ratios and credit is cheap. More declines to come. We are nowhere near market equilibrium.

by BuyLowSellHigh | 4th May 19, 10:48am 1556923737

It's normally 5 years of flattish market after the peak. Auckland's peak was late 2016. I'm picking 5-6 years until upwards phase this time, taking us to 2021/22. And I wouldn't be surprised if Auckland median is hanging around $800k at bottom of the market. But it's a terrible idea to try time the market and now is a good time to buy.

by Voiceofreason | 4th May 19, 4:57pm 1556945847

It would not surprise me in the least if house price to income ratios dropped back to long established, global historical norms in Australia and NZ this time, it’s well overdue. A flat market for a few years isn’t going to do that.

by Ocelot | 5th May 19, 8:55am 1557003341

Considering my dollar can buy far better value housing in terms of rental yield across the Tasman, the current prices just don't make sense in Auckland.

by tothepoint - d… | 4th May 19, 9:32pm 1556962364

For sure, within a few (short) years, there'll be many people wishing they'd purchased during 2017/2018/2019 when, as they will lament, "Auckland house prices were damned cheap".......

Nonetheless, as I've said before, I'm not picking the next upswing to commence before 2021 - at the earliest.

But don't delay too long...... As the old proverb states, "Come hither, don't dither".

TTP

by BuyLowSellHigh | 4th May 19, 8:23pm 1556958189

Absolutely agree

by Retired-Poppy | 4th May 19, 8:48pm 1556959698

Ha-ha-ha :) the Agent TTP says "wishing they'd purchased during 2017/2018/2019" Many Aucklanders that bought in 2016 are already regretting it!

Price erosion is well under way. It has started from the top and its going to move down through the entire spectrum. Not even Barfoots spin will float in this bowl.

by BuyLowSellHigh | 4th May 19, 8:47pm 1556959622

Many? Doubt it. But ask them in 10 years time and they'll be happy.

by Retired-Poppy | 4th May 19, 9:20pm 1556961655

...next you'll be saying 20. To save face, property will likely be lectured by the trapped as an even longer term investment soon. Choice will become a luxury for those overweight in illiquid assets.

Out of curiosity, do you believe capital gains is a birthright at a time when prices are stretched as far as it will go and ripe for a reset? The best outcome possible would be a near decade of steady price erosion to return to sustainable fundamentals. Will you care about tanking home ownership rates/widening wealth divide after the social unrest starts? By then it's too late. Your expectations are unrealistic when you want social harmony at the same time.

by Voiceofreason | 4th May 19, 11:13am 1556925222

What did these guys say about the Sydney and Melbourne housing markets 18 months ago I wonder?

by Retired-Poppy | 4th May 19, 11:28am 1556926138

They were on here saying"Like Auckland, Sydney and Melbourne are international cities. Cashed up buyers will continue to flock and the sky's the limit"

Now, Auckland's diffrunt.

by Retired-Poppy | 4th May 19, 11:36am 1556926578

Disciplined FHB's have ample time on their side. Watch those term deposits grow in size against in proportion to the declining value of the asset in focus. The analysis has been done right here and it's cheaper to rent. Just think of all that interest saved in the long run. Its dead money too.

Even if houses prices just moved sideways (unlikely) they are still declining when adjusted for inflation anyway. After eight years that's around a 12-15% decline overall. It's a no brainer not to bailout skittery and naive investors. Only the bigger fool does that.

by Laminar | 4th May 19, 11:31am 1556926281

15%-17% at 2% inflation, that would be fantastic but im skeptical.

by Retired-Poppy | 4th May 19, 11:40am 1556926812

Yeah, I think deflation lurks just one downturn away. Central banks are for good reason concerned about disinflation these days. Now more than ever, it's all centric around house prices. Its backs what, 80% or more of lending these days?

Not to long ago, David Hisco was quoted as saying the Auckland market was cooked. I guess he's thinking 7-8 years of flatlining will sooth his lingering concerns; https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11…

Of course, this is all assuming 7-8 years without another GFC........

by Fritz | 4th May 19, 2:04pm 1556935446

I am not sure about deflation being around the corner but I do suspect it will be at least very low inflation.

by Laminar | 4th May 19, 4:42pm 1556944963

Will be interesting to see what happens when global rates truly do bottom out, most bonds end up owned by reserve banks, much of the stock market and then... I guess they start buying property?

by Pragmatist | 6th May 19, 9:34am 1557092041

Which they will then rent out to the serfs, but not at below market rents, because that would crash the market and therefore the value of the property they own, so will continue on with unaffordable housing level, but with ever increasing social welfare handouts to the bottom end to keep the ponzi going?
Resulting in the asset owners at the top getting wealthier, the poor staying poor and reliant on govt handouts, and those in the middle being squeezed hard into one group or the other (with the majority heading downwards).

Or am I just being too cynical?

by Laminar | 6th May 19, 12:31pm 1557102690

rofl well i could certainly see that happening. Alternatively ulta-mature capitalistic-fiat economies may naturally transition to socialism.

by Simon | 4th May 19, 3:36pm 1556940960

And your 5 year fixed mortgage now at 4.4%?

That works put real interest rate at 2.4% over that period.

And that 600k mortgage if 15% compound inflation over 5 years? That's now 15% less even if you made zero principle payments.

That's why investors don't mind at all the 5 -7 years of flat prices being eroded by inflation as the mortgage is too - And in 5 years, hey look rents are up 20%, yields looking tempting again, maybe I'll see what's out their

by Wrong John | 4th May 19, 2:12pm 1556935931

Mr Hisco has already had two years since 2016 so only another 5 to go. The cycle is the cycle. It goes up & it comes back again. It feels very orderly at this stage with some individuals having to sell beginning to show up in the stats. It's a global game these days & the taps have been turned down quite a lot out of North Asia over the past 2 years, from both ends it would seem & that can only be good long term. We have enough Yuan in the system. What is starting to come up again & again is the demand side is not firing as everyone gets a little older. These stories appear from around the globe, which goes to remind us(me) what a big deal 1939-45 really was & its after effects are still with us today (in old age). This is a game changer for us especially, as it is us I'm referring to. And, apart from Africa & South America this is a global issue, & both those places are not particularly wealthy places. In fact, global emigration emanates from these two areas which tells me that there's not a lot of upside to global middle class growth from here on, as I'm picking the Chinese middle class growth will level off from here real quick as well. Yeah I know there's still a billion people there on $4-$5,000 USD a year, but some factories closing in Guangzhou & reopening in Vietnam with big work-loss demonstrations in the streets of many cities now being brutally dealt with by their police/Army heavy's. They too are swimming in debt, just like the rest of us, so it's going to be a very interesting 12-24 months.

by tothepoint - d… | 4th May 19, 8:14pm 1556957677

Hi Long John Martin,

When has it not been, "....... a very interesting 12-24 months."?

TTP

by house hunter | 5th May 19, 8:41am 1557002473

Seems a little too soon to use the word "stabilised" in conjunction with the Auckland market when Auckland's HPI has just had 8 straight months of YoY decreases, and the magnitude of those decreases has been increasing.

by Uninterested | 5th May 19, 3:47pm 1557028035

The ANZ comments are realistic. The BNZ comments are more like company spin. Different answers to different questions.

by CN | 8th May 19, 1:59pm 1557280763

Let's assume that David Hisco is correct and that property prices in Auckland will be flat for the next 8 years.

What is the expected return on purchasing an investment property in Auckland for an investor with a 30% deposit and a 70% LVR loan on interest only terms?

If you work through the maths of it all,
1) median house price in Auckland of $856,000
2) current rental yield of 3.44% per annum
3) rental increases of 3% per annum
4) rates and insurance cost increases of 3% per annum
5) mortgage interest rate of 4.5%
6) 3% sales commission for sale of property at the end of 8 years. (to compare a cash vs cash comparison after all costs)

So an equity deposit of $256,800 (30% of house price) to purchase the investment property, after 8 years of no capital gains on the investment property becomes an equity value of $236,037 (i.e a loss of $20,763 or 8.0% total loss, or 1.0% per annum).

Better to put the $256,800 deposit in the bank and earn 2.5% per annum where the equity value becomes $312,886. In this instance you are better off than the investment property purchaser by $76,849 (or 33% better off than the investment property purchaser)

The difference is even larger after allowing for inflation ...