NZ residential rental market news, June 2

ANZ report hints at bottom of market, Govt. will buyout cyclone-hit homes, & Auckland's busy May.

This week's TLDRs...

Downward market momentum remains

Property values in New Zealand fell by 0.7% in May, but the annual rate of change is showing signs of easing. 
Nationally, average property values are now 10.2% lower than the same month last year and $121,000 below their peak. 
Moderating house price falls and the expected peak of the OCR serve as positive signs for homeowners. 
A peak in the cash rate would provide comfort to borrowers refinancing within the next year. 
Mortgage arrears increased to 1.31% in March, but nearly 45% of mortgage holders were ahead on their repayments by the end of 2022. 
The housing market in New Zealand is approaching a trough, considering factors like stabilising cash rates, loosened loan-to-value ratio limits, reduced supply, net migration, and positive trends in Australia's housing market. 
Affordability, impacted by high prices and contractionary monetary policy, is likely to limit demand in the foreseeable future.
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OneRoof House Price Report

New Zealand's average property value decreased by 2.3% ($22,000) to $950,000 in the three months to May. 
Auckland's average property value dropped by 3.2% ($43,000) in the quarter, suggesting prices in the region still have further to fall. 
While house values in all 72 territorial local authorities (TLAs) are higher than pre-COVID levels, the gains made during the boom have been eroded. 
Sales volumes were down nearly 38% year-on-year and over 50% compared to five years ago, with affordability remaining a barrier to entry. 
First-home buyer transactions have dropped 18% despite an increase in their share of the market. 
Investor purchases decreased by 29% year-on-year. 
The recent increase in the Official Cash Rate (OCR) is expected to dampen demand, but the market may respond positively to news that interest rates have reached their peak. 
New listings in May were down 12% compared to the previous month and 21% year-on-year, indicating a decrease in stock coming to the market. 
Market conditions are favourable for buyers, especially for entry-level properties, as prices are approaching or reaching the bottom, and competition from investors is low.
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ANZ's Property Focus Report suggests house market has found its floor

ANZ: The RBNZ’s relatively muted response to surging net migration and additional fiscal stimulus in the May MPS surprised us. Ultimately, for a time at least, this implies looser monetary conditions than we have been expecting. This, combined with surging net migration and the confirmed loosening in LVR restrictions from 1 June, has led us to upgrade our house price forecast. We now expect quarterly house price inflation to return to around its historical average pace over the second half of 2023 before sticky inflation (and its implications for the OCR outlook) puts renewed upwards pressure on mortgage rates. Net migration is a huge wild card for the outlook currently. The recent explosive pace alongside slowing construction activity is resulting in a rapidly widening housing deficit, adding pressure to house prices. In short, housing tailwinds now appear to be blowing a little stronger than the headwinds. But we’re not convinced the RBNZ will be able to let that run. We expect the RBNZ will need to tighten monetary conditions later in the year once all has been revealed in the data.
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RealEstate's figures suggest market downturn is over

Average house prices in New Zealand have been steadily decreasing since their peak in January 2022, remaining flat for the past few months. 
The recent increase in interest rates, with the Reserve Bank hiking the OCR for the 11th consecutive time, may coincide with the flattening of average prices. 
High interest rates have impacted the market's recent slow pace, as tighter finance has caused some buyers to reconsider their lending options. 
The national average asking price in May was $866,696, slightly below April's figure but down 9.6% compared to the same time last year. 
Despite the year-on-year decrease, average asking prices remain higher than pre-COVID levels, showing a 22.5% increase since March 2020. 
The number of new listings during autumn this year reached a 16-year low, almost matching the levels seen during the 2020 lockdown. 
The combined total of new listings from March to May was 23,743, down 18.2% from the previous autumn. 
The drop in listings is likely a result of market uncertainty, with buyers and sellers delaying decisions due to factors such as interest rates and political uncertainties. 
Stock levels in several regions began to level out, with seven out of 19 regions experiencing a year-on-year decrease in May. 
Auckland saw a 9.1% decrease in stock, Hawke's Bay 9%, and Gisborne a significant 36% decrease, potentially influenced by recent severe weather events. 
While not reaching the low levels of 2020, this indicates a possible market shift as stock levels align with demand, which could eventually impact average asking prices. 
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Govt. buyout for cyclone hit properties

The Government will provide funding for councils to offer voluntary buyouts of homes in cyclone and flood affected regions. 
Finance Minister Grant Robertson expects a buyback of homes under threat of flooding could cost up to $1 billion, although only some of that cost would be met by the Government. 
Councils will target residential properties in Category 3, which are high-risk areas where future weather risks cannot be mitigated. 
The cost of property purchases will be shared between central and local governments. 
Valuation criteria for affected properties will be determined in the coming weeks. 
Engagement with affected property owners will be led by the councils. 
Details on cost-sharing and treatment of uninsured properties are yet to be decided. 
Flood protection and resilience measures will be funded for properties in Category 2, where severe weather risks can be managed. 
Hawke's Bay councils have made initial assessments of properties in Categories 2 and 3. 
Auckland Council will begin contacting property owners from June 12, and Tairāwhiti has already started contacting Category 3 property owners. 
An estimated 700 properties fall into Category 3, while up to 10,000 homes are in Category 2, including affected properties in Northland and Wairarapa.
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Construction sector gets a timely boost

Rise in build-to-rent and social housing projects may help sustain the construction sector during a downturn. 
CBRE New Zealand research shows an equal number of for-sale and not-for-sale apartment development projects in the pipeline. 
Not-for-sale developments can help developers stay active and finance their builds during the current slump. 
The government's Build Ready Development pathway supports the construction industry by encouraging the purchase of development-ready land and underwriting pre-sales for development finance. 
The non-saleable sector has grown by a net of three projects, indicating a positive outlook and the stability of Kainga Ora projects.
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Opes: The important part of National's new policy

National's new policy aims to force councils to open up land for development, providing 30 years' worth of land available immediately. Councils will need to assess population growth over the next 30 years and make enough land available to accommodate that growth. Different cities can decide on the type of development, such as more density or standalone houses. Christchurch's example, where 30 years of land were released after the earthquakes, saw a significant increase in property construction and subsequent price growth. While opening up more land could temporarily stall property price growth, other aspects of National's policy, such as tax changes benefiting property investors, could increase demand and push prices up.
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Auckland housing market has a busy May

Auckland's housing market had its busiest month in a year in May, according to Barfoot & Thompson. 
Sales of properties increased by 52.9% to 723 compared to the previous month. 
Although sales were down 7.5% from the same time last year, they were up 31.7% compared to the previous three-month average. 
Barfoot & Thompson's managing director suggests that the market may have hit the bottom of the current cycle or is close to it. 
Despite the increase in sales, median and average sales prices in the region fell further in May. 
The median price dropped 4% to $955,000, and the average sale price was $1.07 million, down 1.5%. 
However, there is speculation that the market may be starting to bottom out due to mortgage rate rises peaking and increasing demand. 
ANZ economists suggest that house prices have found their floor and will start to rise. 
While the number of new listings increased in May, the total number of properties on the market is the lowest in 14 months, providing more choice for buyers compared to pre-Covid days.
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