November 2018 REINZ Housing Market data

November 2018 REINZ Housing Market data

Key Points

• November was a disappointing month for housing activity across much of the country according to REINZ housing market figures released today. There were almost 7,300 unconditional sales recorded in the month, this was 2.6% higher than the same period last year, but seasonally adjusted sales were 9% mom lower. This follows a decent jump in sales over October, which is believed to have been driven by a rush to get transactions through ahead of the foreign buyers’ ban that came into force on October 22. In Otago, the bolthole of choice for foreign tech entrepreneurs, Sales did jump 17% mom in October and then fell 8% mom seasonally adjusted in November.
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• In general though, the housing market continues to run with recent trends. That is, Auckland house prices aren’t up to much, and prices in much of the rest of the country continue to outpace their northern neighbour as they play catch up. There are even pockets of buoyant housing markets such as Whanganui the Manawatū and the Hawke’s Bay. National house price appreciation eased a touch to 3.5% yoy from 3.8% yoy in October. House price appreciation has been tracking between 3.5-4.0% for over two years now. This is set to continue.
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• Current developments are consistent with our view that the housing market has entered a period of consolidation. Meaning national house price appreciation is expected to move broadly sideways for the next year or so. We reiterated this view in our updated outlook for the economy (Hood the Hawks ). The housing market has been contained, because of Government policy uncertainty and tough restrictions on investor-related lending. But the market is well supported too and far from falling off a cliff. We have a massive shortage of housing, record low mortgage rates, and an unemployment rate at 3.9%. All this justifies the RBNZ’s announcement of a fortnight ago that Loan-to-Value Ratio (LVR) restrictions will be loosened slightly from 1 January 2019 (see here for more detail).
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• Looking at the regional detail, Auckland hasn’t really risen from its slumber. Annual house price appreciation was again slightly negative in the City of Sails falling 0.6% yoy, but in November prices managed to lift 0.3% mom seasonally adjusted. There have been many questions raised recently as to whether Auckland will follow the big Aussie cities, like Sydney, in a downward price spiral. We don’t think so. Unlike say Melbourne or Sydney, Auckland has experienced a period of massive under building which is only now slowly being made up for. The ongoing housing shortage should underpin Auckland housing demand for the foreseeable future. Annual house price appreciation across the country drifted lower in November, but is still running at a decent clip in many places. The Manawatū-Whanganui region actually saw house price appreciation rise to 16.4% yoy from 15.8% yoy in October – this has been a standout region for some time now. Another standout region of late has been Southland, but this market faltered in November. Sales fell a whopping 19% mom seasonally adjusted. There was unseasonably bad weather over the south of the country last month, which may have put off some house hunters.

Policy Implications

There are limited policy implications from November housing market data. The market is well contained with modest sales activity and house price appreciation happy to stick around 3.5-4% yoy. That means credit growth is less likely to simply take off and undermine financial stability. A key reason as to why the RBNZ announced looser LVR restrictions last month.

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