NEW ZEALAND
Data released in NZ today showed a soft housing sector with Q1 residential construction down 4.8% q/q and CoreLogic house prices for May falling 0.2% m/m, the second straight monthly drop but they are 1% higher than a year ago. As a result, the RBNZ is unlikely to be concerned that the sector is adding to inflationary pressures.
- With the working age population rising 3.1% y/y in Q1 demand for housing has been strong reflected in rents rising 4.7% y/y and house sales up sharply.
- Strong population growth and weak residential construction has resulted in strong price rises in Australia since early 2023, but in NZ CoreLogic prices are still 10.7% below the March 2022 peak and only 2.9% above the September 2023 trough. Australian prices in May were 13.8% above their trough.
- CoreLogic notes that there has been a shift with policy changes impacting the market. The first home buyers grant has been abolished and a debt-to-income cap has been introduced but the LVR rules have been eased which should be supportive.
- The RBNZ has made it clear that rates are on hold for now and so with mortgage rates unlikely to ease this year and housing affordability at its worst since 2008 (HAI is 36.5% below trend), the housing market is likely to remain soft and rental growth high.
- Housing has been undervalued in NZ for the last year and that increased slightly in Q1 to 4.8% from 4.6%.
NZ housing affordability vs home prices %
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