A collapse in buyer interest has seen the number of homes listed on Realestate.co.nz swell by 77% in May compared with a year earlier:
The chart below shows the number of homes available for sale in all regions at the end of May compared to the end of May last year.
Significantly, new listings across the entire country in May were up only 2.5% compared to May 2021, the second chart below shows new listings by region.
So the increase in stock levels is due almost entirely to a slowdown in sales.
According to the Real Estate Institute of New Zealand, there were 4860 residential properties sold in April this year, down 35% compared to April last year.
These results align with the Reserve Bank of New Zealand’s (REINZ) latest mortgage data, which recorded a whopping 30% decline in mortgage commitments in the year to April:
From boom to bust.
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The crash in buyer demand makes sense given the surge in mortgage rates following sharp increases in the official cash rate (OCR) by the RBNZ.
The RBNZ’s ‘forward track’ guidance sees the OCR rising from its current level of 2.0% to 2.7% by September and 3.4% by December, before peaking at 3.9% in June 2023. In turn, the RBNZ forecasts mortgage rates to climb to around 6% – more than double their pre-pandemic level:
Mortgage rates projected to more than double.
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New Zealand house prices have already declined by around 5% since November 2021, with the major banks and other forecasters tipping further heavy price falls.
Clearly, New Zealand home buyers are attune to these facts and are weary of catching a falling knife. Who could blame them?
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
