Quarterly Property Market & Economic Update
Total Page:16
File Type:pdf, Size:1020Kb
Quarterly Property Market & Economic Update New Zealand | COVID-19 special edition Quarter 2, 2020 Table of Contents About CoreLogic . 3 Executive Summary . 4 Macro Economic and Demographic Indicators . 5 New Zealand Asset Classes . 6 New Zealand and Australia GDP Growth . 7 New Zealand Population and Migration .. 8 Regional Building Consents . 10 Consumer Confidence . 10 Employment . 11 Interest Rates . 12 Housing Overview . 13 Early Property Market Indicators . 14 Listings . 15 Lending conditions . 17 Sales Volumes . 18 Nationwide Values . 19 House Price Index . 20 Rent . 23 Buyer Classification . 24 Main Cities Housing Market Indicators . 25 Auckland Market Activity .. 26 Auckland Values . 27 Current Auckland Suburb Values . 28 Hamilton Market Activity . 30 Hamilton Values . 31 Tauranga Market Activity . 33 Tauranga Values . 33 Wellington Market Activity . 34 Wellington Values . 35 Christchurch Market Activity . 36 Greater Christchurch Values . 37 Dunedin Market Activity . 38 Dunedin Values . 39 CoreLogic Data and Analytics . 40 Legal Disclaimer . 42 2 About CoreLogic CoreLogic is a leading property information, analytics and Contact services provider in the United States, Australia and New Zealand. Call us 0800 355 355 CoreLogic helps clients identify and manage growth opportunities, improve performance and mitigate risk, by providing clients with Wellington office innovative, technology-based services and access to rich data Level 2, 275 Cuba Street and analytics. PO Box 4072 Wellington 6140 Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, Auckland office currency or completeness of the data and commentary contained in Level 5 this publication and to the full extent not prohibited by law excludes 41 Shortland Street all loss or damage arising in connection with the data and Auckland 1010 commentary contained in this publication. Email: reports@corelogic .co .nz corelogic.co.nz 3 Executive Summary COVID-19 special edition It’s obviously been an unprecedented year for the to undermine the property market . At the same economy and property market so far in 2020, and time, the normal seasonal rise in listings will be unfortunately we’re not out of the woods yet. Even upon us at that time too, which will be a test for so, we’ve been wary of some of the doom and gloom the strength of demand. And in addition, mortgage out there, because there are factors that could see a payment deferrals could potentially have more or brighter property market outlook than some expect less ended by then as well . September’s General – e.g. look at the large inflows of kiwis returning Election is another potential driver of property home to live, potentially with equity to put to work market uncertainty. in the housing market (but even if they go renting, that’s still extra housing demand). Similarly, housing In terms of the recent buyer mix, first home buyers affordability looks more favourable than it did when have remained a solid presence in the market, but we entered the GFC, thanks to higher household the more significant shifts in market share have incomes and very low mortgage rates this come from investors, both mortgaged and cash. time around . To be fair, some of that rise in percentage market share (especially for cash investors) has been That said, there’s no denying that the economic because of sharper falls in the number of purchases outlook remains weak. GDP is set to fall by 6-7% by other groups, who have had to meet higher this year and unemployment is expected to peak at standards to secure a mortgage (which isn’t an issue close to 10% - a level not seen since the early 1990s. for cash buyers). However, there is also likely to have Meanwhile, the extra government debt that’s been been some genuine ‘bargain hunting’ by investors, incurred in recent months could prove to be a long which has helped their market share to hold up. term restraint on the economy, as we potentially One factor that will have reassured some investors face higher taxes to keep the debt servicing in check. in traditional long-term rental properties is that the feared flood of short-term Airbnb-type holiday lets But as noted, it’s not all doom and gloom. For onto the market (as tourism flows collapsed) hasn’t example, the NZ Activity Index recently developed happened to any great degree so far . by the Reserve Bank, Treasury, and Statistics NZ showed that economic activity in June weighted Overall, property sales volumes could only be across a range of measures was only 1% below a about 70,000 this year, roughly 20% below 2019’s year ago (despite no international tourism). That level. However, in terms of prices, we suspect that return to ‘normality’ has also been seen in the any falls will be smaller than in the Global Financial housing market, with agent appraisals, banks’ Crisis (GFC), when the national average fell by 10%. valuations ordering activity, new listings (both After all, we entered this episode with mortgage for rent and sale), mortgage lending, and property rates much lower and affordability looking better sales all improving and holding at seasonally than in 2007-08, banks in a stronger position to normal levels recently. continue lending, and generally speaking more households with more equity in their homes (due What’s more, given that we entered lockdown to the previous loan to value ratio speed limits). with a low number of total listings available on the This means that the risks of negative equity are market, the return of buyers as we subsequently reduced. Our projection is that average values might moved down the alert levels has seen the supply/ fall by 5-7% in this downturn, which is obviously not demand balance remain relatively tight, in turn welcome for property owners, but a benefit to supporting property prices. That said, there were would-be buyers. nevertheless emerging signs of weakness in our preliminary quarterly house price index for Q2, and As always, we keep a running monitor on the given the downside risks to the economy, it wouldn’t property market every week via our NZ Property be a surprise to see clearer evidence of house Market Pulse articles, so be sure to check these out price falls later in 2020. on our website http://www.corelogic.co.nz/ news-research/all-news/. Our podcast is also a Indeed, the wage subsidy is now scheduled to end great source of data and commentary: https:// on 1st September and that seems likely to drive a corelogicnzpropertymarket.buzzsprout.com/. ‘second round’ of job losses, which in turn will tend 4 4 Macro Economic and Demographic Indicators 5 New Zealand Asset Classes RESIDENTIAL REAL ESTATE $1 .22 trillion $284 billion in home loans COMMERCIAL/INDUSTRIAL REAL ESTATE $227 billion NZ LISTED STOCKS $165 billion NZ SUPER & KIWISAVER $109 billion The value of residential property across the country eroded slightly in Q2, totalling $1.22 trillion, with mortgages secured against 23% of this value. In other words, 77% of the value of the property market is household equity. However, it’s also important to note that household debt is high relative to income, and to some extent the debt has only been sustainable in recent years because of low mortgage rates. The period from April to June was clearly a unique time for the world and financial markets, and the value of shares and pooled investment funds dropped early on. However, more recently, sharemarkets have rebounded and the value of the NZX is now pretty much back to where it was in late March (pre-lockdown). 6 Sources: CoreLogic NZ, Reserve Bank of NZ, NZX, NZ Super Fund 6 New Zealand and Australia GDP growth Annual Average GDP Growth (%) 8 New Zealand 7 Australia 6 5 4 3 2 1 0 -1 -2 -3 1990 1994 1998 2002 2006 2010 2014 2018 Annual Change in New Zealand Activity Index and GDP (%) 10% 5% 0% NZ Activity Index -5% GDP (annual average) -10% -15% -20% 2004 2008 2012 2016 2020 New Zealand’s GDP dropped by 1.6% in Q1 2020, the largest decline in 29 years. COVID-related travel restrictions made a significant contribution to the drop in economic activity in Q1, although continued drought in some parts of the country was a factor too. Given lockdown for most of April and restricted activity in May too, Q2’s GDP figures (released mid-September) will also show a fall – meaning that we are currently in a recession. Indeed, the freshly-released New Zealand Activity Index (NZAC) indicated that activity was down by 19% year-on-year in April and by 6% in May (albeit only by 1% in June). Government support such as the wage subsidy will have limited the extent of recession so far, but was never going to prevent it altogether. Ultimately, GDP is anticipated to fall by 6-7% this year, and the size of the economy will be restricted for some time to come by the absence of international tourists. Source: Reserve Bank of New Zealand, Statistics NZ 7 NZ Population and Migration Quarterly Change in National Population Change Composition Population (persons per quarter) (persons per quarter) 40000 35000 Quarterly population change 35000 30000 Natural increase 4 quarter moving average Net migration 30000 25000 25000 20000 20000 15000 10000 15000 5000 10000 0 5000 -5000 0 1991 2000 2009 2018 -10000 1996 2005 2014 Annual Change in Population (persons) 76,000 24,400 5,300 3,900 3,600 1,400 1,200 New Zealand Auckland Christchurch Tauranga Hamilton Wellington Dunedin National population growth accelerated in the first quarter of 2020, rising from an annual rate of 1.7% in Q4 2019 to 2.0% – the highest since Q4 2016.