Gauges give mixed view of property market

Of the eight indicators three are negative for the market, two are positive and the other three are neutral.
On balance the bank says the indicators are pointing down.

The negatives are affordability, indebtedness and interest rates.

On affordability it labels the market as “expensive”. This is borne out by recent reports on the amount of income is now required to service debt and the fact that Parliament has a select committee looking at the issue.

“Affordability continues to deteriorate sharply, not helped at all by rising mortgage rates.”
Likewise serviceability of loans is rated “high”. The “debt servicing burden keeps hitting new highs and shows no signs of consolidating.”

Not surprisingly interest rates, which are at the top of the cycle are rated as “high” too. They have become even higher since the Reserve Bank hiked its official cash rate last week.

Migration, a key source of demand for new housing, is considered neutral. However recent number suggest it is well off the highs experienced during previous housing booms.

The supply-demand balance, essentially consents versus population growth and net migration is also rated neutral.

Consents and house sales are neutral too: “The real estate market still looks to be supply constrained,” the bank says.

The two positives are factors which arguably don’t rate highly with investors. These are liquidity and globalisation.

Liquidity relates to the amount of credit available relative to GDP. On this count ANZ says that liquidity remains abundant and the demand for credit appears to “be resilient at this stage.” Globalisation is the relative property price movements between New Zealand, the US, UK and Australia in recognition of the important role that globalisation is playing in New Zealand’s property cycle.

ANZ says that on a relative basis New Zealand property still looks cheap.

ANZ concludes this part of its Property Focus report saying: “Mortgage rates have risen, with most of the lending rates at or over 9%. This, combined with a slowing migration record and recent headline job restructuring, is playing into the Reserve Bank’s hands.

“The question is have they got the patience to wait for the inevitable to happen, or are they willing to go once more to firmly hit that last nail into the inflation coffin.”