An avalanche of new listings, increasing interest rates and record consent levels could see New Zealand’s foot come off the house price accelerator in the new year.
Property site Realestate.co.nz, which represents most of the country’s realtors, reported 13,758 new listings for November, a 9% increase and the single biggest monthly jump in listings since October 2014.
That helped propel total housing stock by 5.1% year-on-year to 19,260 homes on the site.
Chief executive Sarah Wood said it’s an early indicator of more housing availability to come.
Wood said it’s been a few years since the site had stock increases of this level, so it’s "an encouraging turn".
She said it looks like buyers "will have more homes to choose from this spring and summer”.
The listings bonanza comes as the Reserve Bank of New Zealand (RBNZ) is expected to continue ratcheting up the official cash rate (OCR) after its hike of 25 basis points to 0.75%.
Mortgage interest rates followed suit, with most shorter-term fixed rates now at or above 4% and potentially heading to above 5% over the next six to 12 months.
Corelogic chief property economist Kelvin Davidson said borrowers on one-year terms could have a significant shift in their monthly mortgage costs.
RBNZ data shows there is currently $227.8 billion in mortgages either floating or due to roll over in the next year, representing about 71% of all lending.
Affordability warnings
That is “a lot of funding”, which when refixed, will lead to greater mortgage repayments and subsequently less disposable income, he said.
Increased house prices over the past year, with indexed house price inflation up almost 30% for the 12 months to October, has also seen mortgage payments as a percentage of gross household income hovering at 41%.
That is above the average of 37% and the highest since the second quarter of 2008 – when mortgage rates were above 9%, Davidson said.
He suggests a mortgage rate of 5% now would lift that repayment burden to 46%, and at a 6% mortgage rate, it would climb to more than 51% – which would be the worst level for at least 18 years.
The data analytics group expects a slowing in property values into next year helped along by the tightening credit conditions, as fewer owner-occupiers are able to secure high loan to value ratio mortgages.
Meanwhile, the latest consent numbers for October, due out later today, are likely to show a continued cycle of rapid-fire new residential building.
There were a record 47,000 new builds registered over the 12 months to September, up a quarter on the prior year.
Almost half of that was for new builds in Auckland, on the back of a dizzying rate of growth for terrace and multi-housing units. That accounted for about 70% of the 1,691 homes consented during the month.
