Slow but steady improvement

Lower mortgage rates could take a while to make an impact.

The ANZ uses the eight property gauges to assess the state of the property market and whether warning signs are emerging. Most gauges are in a high position but weakening and the rest are in a neutral position.

Housing affordability remains expensive, but “the affordability mouse is beginning to run down the clock”, the report says. “The number of house sales ticked up in July, but the more telling indicator is the length of time to sell – which has hit a record high. Prices remain unchanged and this will be the next step in the housing market adjustment, as vendors adjust their price expectations to match market conditions.”

The ANZ says serviceability (interest payments to income) and indebtedness (level of debt relative to income) remain elevated. But they too are on their way down.

Interest rates are high as well, but the bank notes they are marching in a downward direction.

Migration – a key source of new housing – remains at a medium level, neither going up nor down. The steadiness of supply and demand for housing is seen as being balanced. Liquidity or the availability of credit to support the property market is high, but it’s heading down.

The ANZ also looks at the relative property price movements between New Zealand, the US, UK and Australia, recognising the important role globalisation plays in New Zealand’s property cycle. This gauge says New Zealand is still “not that cheap” but prices are tracking down.

The bank anticipates a slow and steady improvement in the economy as opposed to a spectacular rebound in momentum in 2009. “Underpinning this prognosis is the notion that households are in for an extended period of de-leveraging, as imbalances in the form of a high current account deficit and low savings rate are addressed.”