Mortgage stress


Recent reports indicate a slowdown in New Zealand’s housing market, with expectations of stagnant growth in the first half of the year.

Both New Zealand Home Loans (NZHL) and BNZ have signaled a loss of momentum in the housing market, a sentiment echoed by Infometrics chief forecaster Gareth Kiernan, who stated, “It’s definitely not a sellers’ market.”

Major bank slashes mortgage rates

NZHL sponsors economist Tony Alexander to conduct monthly surveys of licensed real estate agents across the country, providing insights into market conditions. According to February’s NZHL report, there has been a noticeable decline in buyer activity. A net 6 percent of agents reported fewer attendees at auctions compared to previous months, indicating a shift in buyer interest. Similarly, there has been a substantial decline in buyer attendance at open homes, with only a net 9 percent reporting increased attendance.

Despite these declines, first-home buyers remain active in the market, although the proportion of agents reporting their presence has slightly decreased from 55 percent in January to 43 percent in February.

BNZ’s Property Pulse report attributes the sluggish market to high mortgage rates and stretched affordability, forecasting a flat performance for the first half of the year.

The NZHL survey also highlights a surplus of motivated sellers over motivated buyers, as evidenced by the high volume of property appraisal requests received by agents. In January, a record net of 76 percent of agents reported increased requests, which only slightly eased to 61 percent in February.

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This surge in listings, coupled with concerns about employment and income stability among buyers, indicates a market grappling with uncertainties. The Reserve Bank’s discussions on tightening monetary policy have further heightened concerns about interest rates.

However, there are signs of relief, as fixed mortgage rates have begun to decrease after a period of increase. BNZ anticipates that employment anxieties will temper housing demand, while the diminishing Fear of Missing Out (FOMO) among buyers reflects a more relaxed market sentiment.

BNZ’s report acknowledges that these factors are counteracting demographic and policy supports favoring the market. Despite this, Kiernan anticipates a market rebound in the latter half of 2024, driven by lower mortgage rates and potential boosts in demand from migration increases. However, he cautions against overly optimistic predictions, citing affordability constraints that may limit significant price growth in the coming years.