Episode 1 - RBNZ, affordability, market activity

In Episode 1, Nick and Kelvin chat about the latest RBNZ Monetary Policy Statement and the included OCR decision. They also review recent investor market activity according to the latest CoreLogic Buyer Classification data and discuss housing affordability, a pretty hot topic in NZ at the moment, especially with the General Election scheduled for 19 September 2020.

Check out all CoreLogic Research info at https://www.corelogic.co.nz/research-news and get in touch on twitter @NickGoodall_CL or @KDavidson_CL

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Transcript

spk_0:   0:12
and welcome to the New Zealand property market Podcast Brought to you by CoreLogic Produced by agents, TV. And today I am joined here with Kelvin for Episode one on the 17th of February, 2020. Kelvin, how you might

spk_1:   0:25
very well. Very well. Good to be cracking into this thing.

spk_0:   0:29
Very cool. I'm doing good, mate. Doing very good, obviously on baby watch at the moment with my wife heavily pregnant. And I mean, we're not do too much in the weekends. But how's your weekends? You got too much.

spk_1:   0:39
A lot Pretty standard for us. You know, the kids kids are not exactly playing ball was sleeping at the moment. So begins. Yeah, well, about trying to stay calm and collected and catch up on that sleep so well, it was pretty standard.

spk_0:   0:55
What's the latest on your house? May only obviously in the market at the moment.

spk_1:   0:59
Yeah, eso hopefully go on conditional. Tomorrow is supposed to be supposed to be last week, but you know, things happen with our sales and you want to dot the i's and cross the T's. So you're hopefully tomorrow kind of keeps you on tenterhooks about, but yeah, hopefully tomorrow and then, you know, onto the next bigger and brighter thing, I guess,

spk_0:   1:18
and confident of a decent price for your place. How you How you feeling about that?

spk_1:   1:22
Yeah, yeah, Ran dry liver. And I mean, it's good. Good anecdote for Greater Christ church market. I guess that living and so on. Let me see. A lot of construction and properties are sitting on the market for a little bit of time. So this way we can to get started early and get this process kicked off because it could take some time. But I think we've got a pretty good price, Pretty happy with what we've got. And I suppose it shows that if you price realistically look a bit like an estate agent here. But if you price realistically, then you know there's always a buyer out there on DH. That's what we did. So yeah, even with all that new supply stuffs Tony over, So Yeah,

spk_0:   2:01
Sounds good, mate. So? Well, good luck for tomorrow, anyway. Yeah, Look, I suppose

spk_1:   2:06
with the upcoming

spk_0:   2:09
Yeah, hopefully a few more days yet? I reckon so. Last pose in terms of the plan for today. We'll go over major Dina races that we've seen the last week, any other sort of storeys and things that we've seen or been talking about Andi and look forward to next week before sort of giving a few ideas for how people can get in touch with us. So let's get into it then. I suppose one of the biggest things for last week was of course, Reserve Bank. They're six weekly OCR review and also the monetary policy statement at the same time. What did your wages will pick up from that? That statement last week?

spk_1:   2:41
Yeah, a couple of things for me. Surprisingly positive view on the economy and for these things going on. I suppose this time issues around when they prepare these statements, but pretty positive. You're on the economy. You know, GDP is supposed to stay up with that. Growth is supposed to stay pretty steady and labour markets doing strong. And so things that I guess people were expecting a little bit of ah toning down on some of those views. They stayed pretty positive, actually. And no so consistent with it, didn't didn't change the cash, right, Kito, Keep that 1%. So it also made sense. But then you've got these things linger in the background around. We see the Corona virus, which is the timing of these reports might not have. You might not have been wonderful the effect of that on, but yes, it was some interesting contrast there. And I guess they thought they were pretty quick to stress that of Corona virus turns out where sonority is, then you know, they stand ready to cut rates. So on the whole recently positive on DH with flat rates but chance of cuts coming up, that Corona gets a bit worse. See, that was my take in the ship. Sort of picked out.

spk_0:   3:54
Remember, you mentioned on the day itself that you were surprised to see almost any mention of the housing price housing market itself on that statement?

spk_1:   4:03
Yeah, that was the other thing. And I mean, we're reading at that desk. And yes, I will do what's going on here that has a market such a crucial part of the economy of the moment and that that pick up everyone's wondering, you know, here is that gonna feed through Tau Teo Teo consumer spending and therefore GDP and how monetary policy might react to that. So, yeah, it was interesting that that didn't get flagged up and some other people around the traps link turn and on various social media where were sort of hollow in that as well. So it's an interesting one. It's hard to believe that it would have been an oversight, whether there was someone underlying reason where they decided, not toe refer to the housing market. But yeah, it doesn't really make much difference.

spk_0:   4:46
I wonder e want if there wasn't a ll that much new or different data for them, so it didn't warrant too much of an issue. Could be No one could have seen that strength towards the end of last year in terms of value is going up and just increasing of lending data as well. And of course, there has continued from the most recent data from Reserve Bank. So maybe it wasjust yet, but say we've seen so no need to give it too much air time. But of course, is that continued point for consideration from them. Another thing, I suppose that you know that in the lead up to the always interesting, you know that the guessing game everyone goes through is what are they going to do with the and what the potential reasons they might drop or do otherwise. And I think the key thing was off course that caution around the Corona virus and where the Reserve Bank pre Hibs, in the impact that it might have so clearly weren't too worried at that stage. As you say, a little bit of timing issues their terms of when they have to have everything ready. But certainly, as you say, they've got their availability to drop that if they need to, if it does get worse and we do see a band for a longer period of time in terms of travelling or there is a more significant impact to our GDP. So I suppose you say another wait and see from them pretty conservative always got up their sleeve if they need to.

spk_1:   5:55
Yeah, and I think with the housing market is well, bear in mind that this this whole hold statements around interest rates and monetary policy and they're probably not going Tio. If they do anything to take it the housing market From now on, it's probably going to be around those L V r rolls eso. They've almost got it. Andi expanded. Talk it now, Tio deal with things. Mohr. Specifically, the interest rates always been a little bit of a little bit of a blunt tool for the housing market because, you know, you might stick up interest rates. Toe choke off hasn't market up tio a lot of other stuff in the economy. So to have that targeted talk to get it the housing market now with with LV, ours maybe that's what they started thinking about rather than the yeah, that's take around in the background as well.

spk_0:   6:40
Cold, Very interesting. Certainly just I want to watch. And I think Reserve Bank, when we're looking for everything for 2020 they are, of course, one of the key influences of the market. So always looking out their statements and their releases so well, interesting line. Now, from our own perspective, from our data, of course, we had our latest by classification data for January came out last week, which you wrote a little market pulse on what sort of the main points you took from that one

spk_1:   7:05
again. Probably two or three main things. Really. The first thing was thiss rise. And for mortgage investors that we saw towards in the last year, both in terms of percentage transactions and just the number of deals, you know that they just made more purchases. That kind of kicked off around August, September last year, and that's continued on and toe jam Neary. So the share of transactions going tio bullish investors about 25%. And that's up from 2021 22 press six months ago. So there has been there's been this this upturned from from that group of wires. And there's a few things going on in the capital gains tax proposals being scrapped around about the middle of last year seems tto unleashed a bit of that confidence again. But But also just look at what else is going to stick their money and turn deposit rates. That was looking the other day. It kind of our percent, you know, pretty pretty poor on Biff. You're looking around the country in terms of gross rental yields on property. You know, you could get a lot better than that and many parts of the country. So not not hard to understand why, why that trend going on, and I guess the second main thing is that there's a few areas were not saying that investors are driving out first time buyers necessarily. But there have been some areas, including reflected in the cargo Palestine, north and Wellington City, where those most investors have come back pretty strongly. And at the same time, first time buyers have just shown signs of struggling a little bit. So you know, a saint, not not saying that investors are driving out first time buyers. But there is. Ah, there is a correlation going on there, and it's happening at the same time. So interesting things. And I think probably in the end, a lot of it just comes backto affordability pressures. They're old, just off stuff. Getting harder for first time buyers. Lucy quit is just there. Price rises, air, starting toe. They make me feel the pinch, I guess. And yeah, being interesting and shoe for well, for local government and those areas in central government over the next seven months leading up to the election. So yes, um, interesting things going on around there and we'll be we'll be monitoring as we go. You know how she got out of it and

spk_0:   9:15
I think your point around, you know the first time by striking in some of those areas. As you say to May, there's been strong price growth for a long period of time That is going to impact affordability. So it depends really what's happening at the banks, and we know that they're being one of those serviceability tests of produce, and that's helped out some first home buyers. But maybe that growth that's just continued on has been that the start started to unpick those first time buyers and maybe having to look further from town or whatever. And that's why I might not see them quite as active. And someone like Wellington study. So yeah, but I think, as you say, you know, previews for 2020. We were talking about the strength of more wished investors, and there would be the year on DH. Not so much first time buyers. We really have had a a pretty good time of the last couple of years, you know, honesty.

spk_1:   9:57
The absolutely way talked about in our research has been the sort of a year or two, the year of the first time, buyer and 2020 may now be shaping up as perhaps the year of the investor to say whether how government starts to feel about that particular, given the emphasis of this government's head on, helping first time buyers and building more properties and getting more people into the market have probably just the wrong time from their point of view, to have to have investors coming back. And it's gonna be an interesting It's interesting that you have that issue plays there,

spk_0:   10:31
tell, agree and what the other part of it is talking about that Wellington city. And certainly, obviously it's where I'm based on a lot of discussions, even the 1st 1st month and 1/2 of this year. Talking to brokers and agents and even friends and family when I'm out and about talking about what's going on the market and that Wellington City marketers going pretty strong at the moment certainly doesn't seem to be any anecdotal discussion about being only investors. Of course, it's a mix of different types of buyers, but competition remains strong and certainly the feet Baker's people taking advantage of their availability of money. Certainly they're feeling pretty good about their financial situation. So the going and extending their mortgages, borrowing money, getting those first homes and and acting in the market. So that's the sort of backs that activity up a CZ. Well, that I'm hearing pretty regularly now from a lot of people around Wellington. So Azan interesting market to keep ahold ofthis Well,

spk_1:   11:20
yeah, additionally. And I mean, where I live for is to sit down on down Cannery is different market dynamics with that supply going on a ll That new construction going on around greater area. Yeah, we've seen this speck out. We've seen and property values around the country in the last few months, even signs that it's spring to Canterbury. So does suggest that genuine demand coming back even despite those affordability pressures. And I guess the difference around here is that thiss choice for buyers as opposed to, say, Wellington do need and all these other markets where prices rising really really strongly. It's just not much choice in those markets. So and

spk_0:   12:03
also constrained by land. Right? So you look at Auckland, Wellington City, Dunedin all boat with, you know, really restrictive land. It'll nurse miss and all cloned. You got all these holes and stuff and Wellington, whereas Christ Church in the wider, wider region just doesn't have that problem. You khun boat anywhere and everywhere you're like so definitely has probably haven't had that influence over the last few years. We haven't seen that growth and the prices because their land availability is so much greater in the canopy region. On the affordability thing just reminds me of the fact that we did that brief interview with News Talks Bay last week. Of course, there was some data or out last week in Australia, talking aboutthe wealth of people, whoever mortgaged when they get to retirement competed, those that are renting. And of course, we had a quick discussion with Kate Hawkes be on news talks. There'd be about that one, and it was really interesting. And I think it brings up this point of affordability being such a crucial thing for the share. No doubt going to play a big part in both a ll the party's discussions as they try and lobby to get the vote in the general election and September this year. And the key thing I think we have to talk about was yes of course, the fact that people could get a mortgage to increase their wealth, you started leverage against that wealth. That's how people have been doing that for so so long now. And not everyone's Khun do that in the future. And so one of the points are made on the interview was to talk about, You know, we've got to start looking at these other options for for investments, So it's not always going to be about property. If you're looking toe retire, you want some wealth. At the moment, most people think the only way to do that is to own property in your retirement. So the challenge to the government is the thing. How can we start the balance the cell toe to give people investing and other things get back in the stock market? Different type of managed funds? The likes of this shares is in the hedge and the things as well, so there's different options out there, but they're just not seen as quite as attractive as property market. So whether that changes with the different generations to take their own board certainly want to watch out for Aziz, get their retiring population and and new people coming into the market that just cannot buy.

spk_1:   14:00
Yeah, I couldn't agree more. And also is this is this ingrained psychology thing going on certain in New Zealand, Lots of other countries, Australia, that the UK I guess the sort of anglicised world that is to say, home ownership is the only way to wealth. Now there's a lot of countries around the world were renting a CZ, the dominant tenure on the property market. I always come back to Germany in this discussion. Most people in Germany rent, and you'd hardly say that Germany is a poor sort of dysfunctional countries. So it's not always the case that becoming wealthy is done through, you know, owning your home and then paying a few more, which, as long as you're sensible with perhaps she rent and your monthly outgoings are lower, assigns your sensible with the difference. And perhaps she put in some of these shears scheme. Your business is whatever the boxer, maybe Sze. It's just a legitimate option in homeownership. So yeah, always two sides to every storey, it's

spk_0:   15:03
always like discipline. I whether you can say the difference between your rate and what you would be paying a mortgage, and people just don't have the discipline to do that. Where's the mortgages? Forced savings? Essentially, it's forced money going somewhere towards some form of asset. And that's one of the key benefits like yes, you know, and sticking on affordability, really, or on wider politics things. There was the Helen Clark Foundation report out last week. I don't know if you caught too much of that one, but certainly from a high level again. I was proposing many of the things we've heard before. We need a more comprehensive capital gains tax way, need to look at the rental side of things as well, and really just reiterated all these points that the market, as it currently is, is not going to survive. We're not going to be able to support new entrance toe the mark. It leaves something significant changes. And the key questions does. Do any of the politicians have thie ability? You're the willingness to actually change anything. Tow major. Did you did you get a chance to look at that report too much?

spk_1:   16:00
Not a lot. I caught the headlines around just the old Justin out of capital gains states coming back onto the table. So yeah, there was There was my main takeaway, I suppose. More generally around politics we've seen just in the last day or so Simon Bridges Getting back into the fray with some housing market related things. Are all these all these issues that come up in every election like capital gains tax? That's come back for by the Helen Clark report. But inside Bridges? Or started talking again about the ring fencing for property in distance is proposing that could be reversed. Also, the foreign by a band that Labour's board and reversing that as well. So, yeah, I think different. Starting to see the election hearing coming back into politics and no housing markets clearly at the forefront, A. Z said earlier, perhaps afford abilities or tied up. And then that's going to be a pretty hot topic for the next seven months.

spk_0:   16:55
Tyler Grey. All right, well, I'm thinking about what's coming up in the future. Then we probably got the Ryans sales volumes, figures that were generally track quite quite closely. That's coming out tomorrow, I think, along with the house prosthetics.

spk_1:   17:08
Yep, yep, This jury tomorrow, according tto. According to my trusty Lichten. So So, yeah, we're looking to see what's obviously what's a bit of interest in there that the trend from last month is very much stronger. So we had a really strong into the sounds like 70 days to sell Standard turn. So especially in Auckland, now opens kind of been the the drag on the market, and now it seems to have switched to be a driver. So you've instance. See if there's continued on into January, bearing in mind that January's always quite a month. So you do have to keep that in mind with interpreting the figures. But yeah, I understand. See how that goes? And I think probably even if January isn't strong because of those seasonal things will start to see that strength. I'm clear as we get into February March, and

spk_0:   17:53
I think we'll talk about it in detail next week. But a word of caution with the Ryans release all the timers to watch out for those median sale prices. The change in median sale price that aren't always is youthful. We look to look at the index. We like to look at the sounds volumes and as you see the days to sell, so I'm sure we'll cover that in more detail next week. But otherwise this weak economic releases working at net migration, what does that out

spk_1:   18:14
migrations out? Well, by the time this goes out, net migration might have already been released. So net migration is 10 45 Monday morning S O yeah, finishing to see what goes on there as well. It's been a difficult serious to interpret lately because of the the revisions. Instead, since it had been making, it can vary in terms of the annual net migration and flows by up to 10,000 month. So, you know, one month they might sounds 55 next month, they said. Well, hang on, mate. Was that showing 45 a little bit difficult to interpret, But whether it's 45 or 55 or 40 whatever the number is, it's still a lot higher than it has been. And historically, you've looked at an average of maybe 10,000 years. So we're still getting a lot of people and that Sze definitely providing a boost to the housing market in keeping those transactions going and keeping prices up. So so yeah, I suspect a safe caution around the revisions, but I suspect still be relatively high, and I'll be adding to those house and pressures.

spk_0:   19:12
Legree All right, might. Well, I think we've covered a lot already. An Episode one. So I think it's probably time for us tow wrap up for the data that we're goingto play in detail over the coming months. So look just for us to say Thanks for less thing. Please subscribe to the overall podcast rate US REVIEW us. And if you do have any questions as well, we're goingto get a little questions, question and answer section going in this So comets on Twitter I'm available neck good or underscore C. L and Calvin's K Davidson Underscore CEO. Or you could also give us an email if you have any other feedback or questions that you'd like us to answer. Nick dot good. Alright, CoreLogic and Calvin dot Davidson Ecological. So, Calvin Well, thanks for your time. Once again, mate, and we will talk to later on, no doubt and have a good week. Thanks for last thing, please had that subscribe button and we'll speak to you next week. Catch up