The NZ Property Market Podcast
Brought to you by cotality, formerly CoreLogic. Each week co-hosts Nick Goodall and Kelvin Davidson will bring you all the latest news, stats and insight to keep you up to date with everything to do with the NZ residential property market. Including sales volumes, house price indices, buyer activity, interest rates, loan-to-value ratio restrictions and all of the macro economic factors that influence our largest asset class. Contact us on twitter @NickGoodall_CL or @KDavidson_CL
The NZ Property Market Podcast
Cautiously optimistic
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Does the state of New Zealand's property market keep you up at night? Well, it's time to sleep easy as we join Chief Economist Kelvin Davidson for a riveting discussion about the country's real estate landscape and economic outlook. We navigate the nuances of the New Zealand Activity Index for May, a vital indicator for GDP, and explore what it truly means for the second quarter. But don't break out the champagne just yet. Kelvin reminds us that the economic seascape can be precarious, and there's no assurance that we won't be navigating negative GDP figures in the following quarters.
In the second act of our dialogue, we roll up our sleeves and get down and dirty with the latest economic data, from the pulse of business confidence to the intricacies of filled jobs. We dissect easing cost pressures, reducing pricing intentions, and a timid resurgence in consumer confidence. Even though the economy appears steady, we highlight potential challenges looming on the horizon.
Lastly, we set our sights on lending trends around trade-up premiums. Armed with the latest lending data, we scrutinize the new loan-to-value ratio speed limit and the enduring high mortgage rates. As we wrap things up, we make sense of the housing market's challenges, the influence of an aging population, and the financial hurdles, especially when bridging finance is required. We invite you to plug in, listen up, and join us in this enlightening discussion about the economy's future. Let's make sense of the numbers together!
Sign up for news and insights or contact on LinkedIn, Twitter @NickGoodall_CL or @KDavidson_CL and email nick.goodall@cotality.co.nz or kelvin.davidson@cotality.co.nz
Kia ora, and welcome to the New Zealand Property Market Podcast brought to you by CoreLogic, produced by Agents TV for the 3rd of July 2023. I'm here to research Ntukodol and enjoy more about Chief Economist Kelvin Davidson. Kelvin, how are you, mate, how's your weekend?
Speaker 2:Yeah, cracking weekend. I had my brother over from Australia and his wife and couple of kids. They came on Saturday and stayed the night, so it was pretty full on eight people in the house. Really good. The kids basically entertained themselves, so it was a good chance to sit back and you got a whole flurry going on around you But then sit back and watch for the sport and a few beers, so it was really good. And yeah, they're expecting a baby in sort of five, six weeks time. So there's busy times all around. So that was good And the time goes pretty quick. So, yeah, back at the desk on Monday morning not really realizing what's happened. So that was awesome. And how about you Here?
Speaker 1:you had some football success. Indeed, mate, indeed. I can't even think about having to host any one of our house The moment, of course, we are squeezed into half a house. But the end of the renovation it's getting nearer and that's getting pretty exciting. But, yes, from my own football perspective, ended up scoring a hat trick at our game on Saturday. Yes, i've dropped down to Masters, or if you call it a drop down, but of course gone to the old boys and in the Masters division and got a chance to get forward a bit more on the weekend and managed to score three goals. So unheard of from my perspective. So, yeah, pretty happy man, from that on that day We're still sitting, our team, and sort of sitting within the top three jostling for that top position and Masters two here in Wellington. So you're all going well on that front, mate.
Speaker 1:And otherwise, yeah, pretty cruisy weekend outside of that decentish weather. You know pretty cold at the moment, but I'd say so far been a pretty settled and mild winter, i'd say here in Wellington. So, yeah, that's always nice and means you can get out and do things. So that's the thing we did actually was go and check out the Lego Brickman Jurassic World exhibition that's on in town, the new exhibition center too, so that was pretty cool. Kids love that. Plenty of interactive things to do, so certainly recommend going and checking that out for anyone in Wellington or visiting Wellington. Very cool, but yeah, plenty going on and very happy days.
Speaker 2:Nice one. Yeah, gee, hat trick miles is awesome.
Speaker 1:I'll certainly bask in it, mate. As I said, never had before for me. So you're a very happy man. We'll get into it, mate, because I think there's plenty to cover off from the last week And it really is going to be all down your alley. Really Quite. A few economic releases And, of course, as I mentioned last week, we did get the New Zealand Activity Index for May, So we now have two months of this economic measure for Q2. The big question to you, mate? I know you've done your recalculating and checking with how this line's odds on us still being in recession in Q2. Kelvin, I know it's two out of three months and it's not a perfect measure, but where do you sit now having a look at that data? Yeah, well.
Speaker 2:So the latest number itself was the FMA NZAC and it was 0.7% higher than a year ago. So you only get that annual comparison And that was following April's 0.8%. So these numbers are not amazing, but at least they're not negative either. They're kind of ticking along. Now when you translate that into what it means for GDP and look at sort of the quarterly change as well, get some seasonality in there. There's a bit of sort of boring stuff going on behind the scenes. But basically when you translate that NZAC to a quarterly GDP number, what we might see for quarterly GDP in Q2, keep in mind that's a couple of months away till we get that result. But the NZAC suggests that maybe we might get an increase in GDP in Q2 of 0.4, 0.5, something like that.
Speaker 2:I wouldn't necessarily worry too much about the number because I think that's very much up for grabs, but I guess it's that directional thing. Is it above zero or below zero? And the latest NZAC suggesting it could be above zero. So we may well have pulled out a recession slightly in Q2. And I think that is consistent with what sort of bank economists are saying that we might see a bit of a rebound in activity, potentially kind of cyclone, rebuild these types of things, but they're also saying that don't think that's all over, because there is a chance then that we go back into a negative GDP figure, say Q3, q4. So I think we're in this sort of economic environment, i guess, where there's definitely still challenges. Technically we might come out of recession, but there's no guarantee that we won't go back into it a bit later, the kind of double dip recession that people talk about.
Speaker 2:So yeah, for now I mean NZAC looking a bit more positive for that Q2 GDP number, but no guarantee that there won't be a double dip recession down the track. So yeah, it's kind of that middle ground, i guess.
Speaker 1:And I guess noting it is two of the three months June we still do well on that data and what flows through with that. So I suppose, while it's only one out of the three months, i could still drag things negative and then you'd have more likely that we stay in recession. So the other way to get that full June data as well, to be really confident or more confident in that data I guess. So I suppose, with the way on that one too. Now there are a few other economic releases. I think it's worthwhile winding into this chat as well. We know that the filled jobs data also came through for May and we've talked about how crucial this is, of course, for the overall confidence in the economy and the fact that people are keeping their jobs and that's holding property prices up as well.
Speaker 1:But I did note that Westpac released the Westpac McDermott Miller Confidence Survey for Q2. So it was for all of Q2 and they had the index dropping 3.9 points, which seems quite significant. And one of the things they spoke about in that release was the tightness in the jobs market starting to ease up. So just that start of weakness may be coming through on the labour market because businesses are not getting the same revenue coming in. I suppose they are starting to consider what's happening from a jobs perspective, and we've still seen a few more high profile businesses that have made some announcements of some job changes as well. So I suppose that's one thing that we need to use to temper our expectation around how the economy is performing in Q2.
Speaker 1:But then from the ANZ Consumer Confidence and ANZ Business Confidence Data for June So just for the month of June they definitely saw a decent lift in the overall sentiment, especially including their own firm's expectations. But obviously that overall confidence level is still pretty low as well. So it's improving, but from a very low base. So again, just keeping that confidence and those expectations in check. But perhaps most importantly, inflation expectations from consumers and businesses is starting to ease as well, and that will certainly be something the Reserve Bank will be happy about.
Speaker 1:And so, from a flow on from that, so should the rest of us, i suppose, in our confidence of where we're going to with the interest rates. And of course the Reserve Bank will be meeting next Wednesday to decide what happens next with the OCR. So I suppose, from an economic perspective, do you want to sort of wind all that together. I suppose We've already talked about how the NZAC is going to flow on to potential GDP data official GDP data but your take on the confidence and the jobs data for where you see things are at Maybe some of that detail I know you looked into probably in a bit more depth than I did Just overall economic perspective for how you sort of think this might weave together for the Reserve Bank and your broader expectations for what it means for consumers.
Speaker 2:Yeah, there's a bit in there. I'll try and sort of articulate it in a nice logical flow. I mean, the ANZ business confidence measure was probably a bit strongly unexpected. The own activity component of it, which is where firms are reporting their thinking about what their business is going to do, actually turned positive slightly in June. So that was the first positive reading in 14 months. So you know firms at their own level they're feeling like their own business might be starting to do a bit better. So that's good. But in the wider business context that the overall sentiment indicator was still negative. So you know there's a bit of a difference between sort of what firms think about their own activity, what they think about their wider sectors. So keep that in mind. But at least that overall business confidence number was what was it? It was the highest level since November 21. So still negative but at least improving. So you know, business confidence improving might still be that low base thing, but at least the trend seems to be improving a little bit.
Speaker 2:And yeah, definitely cost pressures seem to be easing a little bit. Still quite strong, but at least not as strong as they were. Pricing intentions seem to have come down a bit. Overall inflation expectations come down a bit. Same thing for consumer confidence. So a bit of bounce back in consumer confidence still quite low, but at least sort of improving a little bit. And what people think about what's going to happen to inflation is coming down too. So so, yeah, you know you can sort of six, six, one, half dozen of the other. You know you can, you can find positive things, you know. So fine, fine, negative things I think that's probably the same as what I just said with with the NZAC and GDP and sort of find positive things, but it's not clearly positive and there's still a degree of caution. So I think those two things are still pretty consistent.
Speaker 2:Field jobs we saw another increase in field jobs of 0.2 percent in May. So that's, that's pretty good, but it was a slowdown. So I think that fits with the Westpac measure, that maybe things. And keep in mind, with the labor market, we're coming from an extremely tight level. You know employment's a record lows. People have just been screaming out for skilled labor. You know the shortage has been pretty intense. So you know it was always going to slow at some point. You can't keep growing forever in terms of employment. So so you know it's.
Speaker 2:I think that's consistent as well. We're still seeing jobs growth, but but maybe not as strong And I guess firms might be finding it a bit easier to get stuff. They might have slowed down their hiring activity. Anyway, most jobs they do have available, they'll be finding them easy to fill because you know there's migration and you know a bit of slack coming in there. So jobs still up 3.7 percent from a year ago. So we've still got, there's still been some pretty decent employment growth. But, like I say, things can't grow forever And we were going to have a slowdown at some point.
Speaker 2:So yeah, i suppose when you wrap that all together, the confidence, the fill jobs, the overall sort of economic activity kind of fits, you know things are, things are not too bad, but they're not sort of racing away either. We're, i guess we're in that environment where we're just ticking along and at the same time as inflation expectations coming down. So really this is what the Reserve Bank wants to see. You know there was there was that talk for a while of of causing a recession And they almost said we need to have a recession to get these things under control And we need to see the labor market sort of loosening up a bit and unemployment rising to sort of fit our mandate, you know, to get inflation down as well. So this combination of a sort of flat-ish economy and falling inflation even though it's still high, at least it's coming down is absolutely what the Reserve Bank wants to see. You know this is, this is the point of tightening monetary policy is to slow things down and to get those price pressures under control. So yeah.
Speaker 2:I think from the Reserve Bank perspective decision next week, i think they'll be kind of pretty happy with how things are tracking along in terms of what they're trying to achieve. You know nobody wants to see a recession, but at least you know it does fit their mandate And so, yeah, i think we'll see the see the OCR on hold, and you know that's that, that scenario of getting it to 5.5. And you know, seeing how things play out from the whole wait-and-see approach And so far, you got to look at the data and say that it's tracking. You know the way that they'd anticipate and what they want to see, so, so expect an unchanged.
Speaker 1:OCR next week. That's, i think, the great summary and an excellent perspective. And and yeah, it does all come back to the Reserve Bank And it feels like it's, you know, kind of playing out how they would have hoped that, like you said, they needed weakness, but there still seems to be some positivity there And you know, you could sort of come up with different few terms for that whether it is the fact that there's, you know, reason to be cautious but positive. You know we talk about how you know there's a lot at the end of the tunnel but of course there's still challenges remain. It sort of does feel like that, that finally balanced situation where it's not awful but things aren't going really well, which actually would be a bad thing, right, if businesses were out there and doing really well, then actually that's bad thing going against the Reserve Bank, what they're trying to do. So it does feel like we might be in this kind of nicely balanced economic situation which flows through to the property market, kind of behaving in a in a considered and controlled manner too, which is generally what the Reserve Bank will be talking about for a few months now. So it feels like, you know, touch work, things are going okay And there's definitely some positive signs ahead. So you know we're not, we're not expecting a really, you know, terrible turnaround in the economy and also not, you know, continued further, further falls in the property market, which I know that depends on your perspective whether that's a good or a bad thing, but in general we don't really want to see crashing prices. Maybe some continued further falls would be okay, but but in general we don't really want to see that, especially if it was combined with jobs market, you know, and labor market and seeing greater unemployment too, which means you know those people that might be sitting there with increased debt and a lot of property price. You know that's not really a situation you want to see happen to too many people. So, yeah, it does feel like that balances around about, there are thereabouts anyway. Cool, maybe we'll leave that economic side there And there's a couple more releases last week we can talk about.
Speaker 1:The other one from the reserve bank themselves actually was lending data for May. So again it's sort of over a month old now And generally, i suppose, and probably along outside expectations, we know that our own data still tends to lead this. We don't get the the dollar figure or lending, but we know the activity levels for settlements in May is likely to be to be pretty weak, so it was pretty soft. But you reckon maybe some signs there of those lucid LVR requirements which, while they didn't actually come in until June, we know the banks were aware of them and might have started loosening up and getting closer to their speed limits in that May month anyway. Maybe there were already signs of that occurring in that May month. Is that probably your main take from looking at that data, calvin?
Speaker 2:Yeah, yeah it was, and again, i suppose it's, whether you look at these figures, glass half full or glass half empty and the overall lending number was still down from a year ago. It's 14% lower, but that was the smallest fall in 18 months. So you know, is that good or bad, don't know, depends on your perspective. At least it was a smaller fall. So that's the overall number. Yeah, i mean the lending flows to each group investors, owner occupiers still down, but, like I said, not down as much as they used to be.
Speaker 2:And yeah, just within the breakdown the LVR split there was an increase in the share of lending going to owner occupiers at a high LVR in May. So that went up from sort of 5% to 6%. Now, not big and it's still pretty low. Keep in mind, even at the old speed limit of 10%, that's still below that, let alone the new speed limit of 15%. So I think there's still a fair degree of caution there, probably both from banks and borrowers. We're still operating below that speed limit, but maybe just some signs in the May figures that there was a bit more sort of high LVR finance available Now the.
Speaker 2:Thing is when you take a step back. We shouldn't. We've always said this change in the LVR is probably, on its own, doesn't massively transform things, because take out a high LVR, low deposit, it's more debt, and now we've got more withdrawals at 6.5%, 7%. So there is a control there, basically, and people don't want high LVR loans really if they can avoid it, because it simply means more debt, higher mortgage rates. So I think that's really the big factor here. We shouldn't necessarily expect these things to change dramatically because of high mortgage rates. So, yeah, i think it's probably tracking, as you'd anticipate, maybe just a bit more sort of high LVR finance available. It's still going to first home buyers, so that's the group that's really taking advantage of those speed limits. But there is that control there in mortgage rates.
Speaker 2:So, yeah, i think it's probably tracking, as you'd expect.
Speaker 1:Yeah, i mean I think, as I said, we knew there'd be a decent weakness in that May figures. Anyway, it's May drawn down mortgages, which means it's taken probably from mostly April sales agreements, given people often will take a maybe a month. If you buy a property, it takes a month to sell that property And so you draw down the mortgage once you actually take ownership, and so we know it's actually from April's activity in the market. It was a pretty weak month from a sales volumes perspective because we had a number of public holidays it was school holidays in there So sales volumes for April were pretty slow And so we know that it's going to flow through to weakness in May.
Speaker 1:I mean, yeah, the fact that that, like I said, that four year on year was the best since 2021, or whatever it was, to me that seems searching for the positives. I think it just does show that there's still weakness out there. It's hard to get that lending, it is expensive, which is restricting the amount of people that can get it. And, yes, you might see a little bump into barn because a few people can now get that property without having the same size deposit as previously. That's going to suit high income earners, of course, but if you are getting a mortgage with less than 20% deposit, you generally pay for it in some different terms as well. So I still think that'll restrict the market, which is just what you're talking about there. So, yeah, i think it's an interesting one, but overall does just really fit that narrative that it's hard to get lending, it's expensive and that's going to remain the case as we move through, even with looser LVRs similar because those interest rates are so high compared to where they've been in the past. And we know that that affordability measure proportion of income required to service an 80% LVR mortgage is still really high, above 50% nationwide. And of course it does differ for the different cities. But that just does show how hard it's going to be. When I'm expecting that to improve anytime soon, keep a little on demand and mean that this next phase of the cycle is going to be pretty controlled anyway. So that's kind of, i suppose, my general take on that one.
Speaker 1:The other release last week was the CoreLogic one you wrote the article on, you know, sort of one that we do I don't know what it'll be six months every year around the trade-up premium And it looks at it from a quite a specific perspective that says what does it cost for the median three-bedroom property compared to the four-bedroom property And how big is that gap? How difficult is it around the country to do that? That can hold the market back. If you can't upgrade your property, you're sort of holding maybe the first home buyer market back as well. So always interesting perspective to look at And I know there's been some improvement in that trade-up premium, making it a little bit easier than it was in the past. But there's also regional differences there. So you wrote that article went to media Key insights from that one, maybe any key angles the media went with on that Calvin.
Speaker 2:Yeah, so I mean you've covered it off pretty well. It's that gap between that and it's a proxy. Really It's a rough guide. You know what, if you want to go from a three-bed to a four-bed, there will be other definitions of trading up. You know You might want to go to a nicer suburb or whatever rather than increase the size of your property, but that's that's one of the ways. And yeah, the gap still pretty large You're looking at, you know, a couple hundred thousand dollars And most kind of the main centers and a lot more than that in parts of Auckland. So it's still pretty significant now. It came down a little bit. So over the past couple of months or past 12 months, you know it has has fallen, so still difficult to trade up. It's still a lot of extra money, but it's got a bit easier than it was a year ago. So You know people might be looking at that now and so you know It's kind of it's coming to the realms of possibility again to make their move and get that extra bedroom.
Speaker 2:Um, yeah, and I suppose, when you add in, i suppose there's been uncertainty for a while about How long a sale might take, what sort of price you might get when you, when you can turn around that confidence a little bit. So the finances, the, the pure money side of it's got a little bit easier. You add a bit of confidence to that and also just a simple you know people's lives change The um, you know you haven't you have a baby. You, uh, you know you need an extra bit of space. You might work from home. Now You need some extra space, and that's always going on.
Speaker 2:So, um, i suspect there's probably a degree of kind of pent up activity there that people have been really wanting to move But they just haven't been able to. So you, yeah, you look at the finances, confidence and just simply Lifestyle reasons, you know, family reasons, people have to move. So I think when you, when you put all that together, it kind of does suggest that this is a group to really keep an eye on the next sort of while as relocating owner occupiers. It's been pretty quiet, so that in our bio classification figures that you know this could be a group that Does start to trade a little bit more. You know, maybe it creates a okay, if they list something, they're buying something. So you know, the net impact on listings might not be that massive, but it creates a bit more liquidity. There's a bit more activity in the market, so move is definitely a group to keep an eye on and Yeah the figures are all laid out in the article.
Speaker 2:So, um yeah, still a big gap, but it has improved. So, um yeah, watch that space.
Speaker 1:Yeah, i'll make sure I put a link to it, because That's a bit of some detail in there and some of the city level that people will be interested in. What's, what's it like doing in North Glenham, better Wellington, um, but yeah, i mean, you know, you don't have to look at our own personal examples, of course, you recently moved suburbs, um, you know, built new of course, and I'm currently building to add that fourth bedroom. So, you know, that's obviously pretty, pretty close to home for us and it's and it's something that we're going through And it is, like you say, it's life cycle, right, we've my kids are getting older and we want that a bit of extra space for our, our family. We're not having any more children, of course, but they are getting older and need their own spaces and we need our own spaces. So that's part of it.
Speaker 1:The other really interesting thing I know it wasn't covered in your article, it's. It's a different look at this one, but I has come up in a conversation I've been happening with some of our clients recently is, you know, trying to understand those movers, um, and how many people are downgrading as well. You know, like we know, we've got this aging population. How many people are either moving to a new area because you know they're moving out of a big city and Into a smaller area for lifestyle reasons, and or trading down in terms of size and maybe taking the opportunity to, you know, um well, especially if they took on some debt at the peak of the market, maybe they do look at that and say, you know, i can keep having this mortgage, but it's affecting my lifestyle, maybe I could trade down. And and you know, i think that's the other thing here right Is that we can, we can look into that data. There has been a bit of an increase on that type of activity among movers, um, but you know, and I think this just does, maybe we could do some even more work on this, especially trying to understand, you know people, like I said, you want to held back from the market because you weren't sure, if you could, what you could buy.
Speaker 1:Next, you're always concerned and look at the own value of your own property and go, man, it's decreasing in value. But if the next property you want to move to was also decreasing in value, whether that is, you know, more expensive property coming closer to you or you're actually trading down But that probably you're going to buy into, has also come down in value. So, you know, i think that moving market makes it really interesting because, see, it's hard to look at the value of your own property going down. But if it does mean that something else is more accessible or it's going to free up even more cash for you, then that's going to be quite appealing. So, yeah, maybe we can do a little bit more, not just on the trade-out premium, but just about what's happening from that movers perspective People moving to new areas, people moving downsizing, um, and understand what's happening in that part of the market too.
Speaker 1:You know, and it could well be Those that have bought at the peak of the market now going man, i need to get out, um, don't preferably that I want to go renting, but they could downsize their mortgage and and move to a different area to stay in the market. They might have, you know, hopefully, hopefully be in a situation to do that. So there's always a lot of interest in this one and, as you say, for the next part of the cycle, maybe they are one that come out of the woodwork because there is a bit of pent up demand there, not to say it's easy to get that lending, um, of course, especially if you're trying to bridge finance or anything like that, but certainly could be one that that's that's open to to be more active in the future too. So, yeah, maybe another one for for the future list anyway, yep, just wrote that down.
Speaker 1:Yeah, nice, Hey, I'm cool mate. Well, I think there's been plenty obviously happened last week, so I've covered all that off. There is a bit coming up this week as well. We do start off, of course, with our own house price index data. I get that data today So we'll be writing that release to go to market before Wednesday or on Wednesday.
Speaker 1:Don't expect our data to still show that weakness in the market. We know it's out there rolling three months so it's still going to have some weakness across all of Q2. We'll have lower transactions, of course, from April And the market still hadn't really shown too many signs of improvement over those few months. So I expect to see generally negative falling prices and that'll come through in the index for June. But there could be some signs of certain areas that are showing a little bit of a slowdown and that those values falling away. But, as I said, we'll get that data today and we can talk about it next week. I know we've got building consents data for May coming out earlier this week and that lending origination data for May. Kelvin And you and I had a decent catch up on this one and sort of dive into the data a bit more, because we were hoping to get quite a bit from this in terms of understanding the bubble of people rolling off into new terms as we move through the next year or two.
Speaker 1:But, crucially, this really is only about what people are doing when they're taking on mortgages in terms of having a credit event, So not those that are just rolling off their terms.
Speaker 1:So if you've owned your property for 10 years, you've simply got your mortgage coming up in the next month or so. That is not captured by this origination data, which is a bit of a frustration from our perspective. We were hoping it was all of market lending, but it is only those that occur with essentially a credit event, so taking on a new loan, a top up or going to a new bank, of course, with your mortgage as well. So it's a pretty small proportion, I suppose, overall of the amount of lending which is out there. It doesn't give us the full picture, but when you add this to other forms of data, it can still give us a better feel for what's happening in the future in terms of that jump that people are having to expect. So, yeah, I don't know if there was anything else from your discussion and the work that you did to jump into that data. But yeah, any expectations on that one, any detail of missed out on the lending origination or anything else you're looking forward to this week.
Speaker 2:Yeah, i suppose just those lending origination figures are Thursday, that will relate to May, and yeah, it's just telling you what of credit events happening new loans, et cetera, as you said, what terms basically were taking out of one year fixed to year fixed, whatever it is floating. And I suppose, just to point out the context, that lately really there's always a chunk of floating lending going on and that's going to include your revolving facilities, that sort of thing. But really when you look at the fixed component, which is most of it, it's still 75%, 80%. Basically all of that has been on a one or two year horizon. So people definitely still are fixing short, if you like, it's in that one to year horizon.
Speaker 2:So we know that the curve of interest rates at the moment is relatively flat or even sloping down, where those three, four, five year rates are lower than the one and two year rates. But I guess there's a sense in here that people they might be tempted by those longer rates but they're thinking well, gee, interest rates themselves are going to go down. So even if I lock in at a slightly cheaper rate now on that five year term, i might find that in five years that's actually really expensive because interest rates are falling in the meantime. So I think there's a sense here that people are still just going for that one and two year fix Kind of. The rates there are still pretty reasonable relative across the curve And so they're locking in there, seeing what happens, sticking to what they've known. So yeah, we'll get more insight into that. We'll know what people are actually doing in May. I suspect that it's fixing for one or two years again.
Speaker 1:Yeah, great, cool And I think that's the exact insight we can get from this is we can understand what is the market choosing to do, which does probably flow on from expectations of market commentators or whatever anyway, but it's really good to see what people are actually doing. So I think that's where the insight will come from this data. Unfortunately, it won't be as good as we thought, where we thought we could look at how many mortgages had fixed 12 months ago for 12 months and understand that bubble of mortgages coming through, and 70 months ago for 18 months or whatever it was which would give us a feel for that. We still can do that, but it's only of those that had a credit event at those times in the past, rather than all mortgages, and the large majority of mortgages out there are mortgages that didn't originate in the last two years anyway. So that's where I want to provide the clarification. We were hoping to get that insight. We still get it for those that did have a credit event. We just don't get it for the full market. So we can't understand that full bubble of refinancing that's coming up in the future.
Speaker 1:And the hope obviously there was to try and understand what's the interest rate jump that most people will be expecting to hit. Generally, our commentary has been that we've been going through a large jump for many people till we were 1.5% 3% mortgages jump in the last year or two, but it's starting to wind down as a move throughout this year because many people have moved off the ultra low which was in the middle of 2021 now, so two years ago. They've moved from those ultra low to medium interest rate, if you want to call it that, and they haven't then transitioned to a high rate. That's still true, but we're getting that from different sources of data and some estimations, as opposed to the real lending data which we hope we get to hear, but we can't. But still insightful what are people choosing and how's that flow through the future. But not quite as much as we were hoping to get from that one. So, yeah, may want to make sure we provide that insight anyway.
Speaker 2:Yeah, and also these figures relate to new lending originations. People are choosing to fix one or two years. I think you can probably infer from that what's happening across the whole stock and people are coming up to their repricing. If people are taking out new loans or choosing one or two year fixes, probably pretty likely that people repricing their existing loans are taking out one or two year fixes as well, because the incentives are pretty much the same. So, yeah, I suspect it probably does tell you something about what's going on in that repricing sector, which is by far bigger. Just, we don't know for sure. What we really need from the Zurb Bank, I guess, is when people come up to reprice, what are they doing? And maybe that's coming.
Speaker 2:But yeah, it's still useful, still tells us something, and if you can infer anything from this new lending data, well, that will tell you about the stock as well. So, yeah, i think it's still pretty useful.
Speaker 1:I think it's a fair point. and the other side of this, of course, is maybe those that are of real interest are those that have had a credit event in the last two years, Anyone that did pick up a mortgage or move banks, which might just mean transferring money over, but it could have been extending loan two years ago. So we're now talking about pretty close to peak. Those are the ones that are maybe of more interest to, especially if they were new lending, a new first-hand buyer picking up two years ago and the majority of the lending on two years and their jump's going to be pretty big. So maybe, while it is only a portion of all lending out there, those are the ones of most interest too. So, understanding when that flow and peak of dollar value of mortgages comes up which we did see from that data that September in particular there's going to be a lot of lending coming off and having to be paying at higher interest rates. That's certainly when maybe the banks will be most cautious, certainly be working with those customers to ensure that they're preparing for this time as well. So I suppose it says while we think we are through the worst of it in terms of most people, when they've rolled off onto higher terms, have managed to do so okay. There are still some people out there that will be coming onto higher terms. They might have been rolling onto higher terms that are higher than what they were tested at if they did get the mortgage at the lowest end of the market in terms of where interest rates were at. So there's still reason, I suppose, to be cautious around that too. Is that anyone that did have a credit event two years ago, 18 months ago? they are the ones that are probably going to be tested the most when they come onto refixing in the next month or two as well. So, again, there's still some real insight from this. But I just wanted to keep expectations and check, because it wasn't the whole mortgage market, Although we do get that stock level stuff and that's where we've done the other data around how much stock's rolling off and how much is on 12 months and what's likely to look like for that jump as well. So, yeah, plenty in there, and we'll continue to pay close attention to it and the insight we get will, of course, discuss it a future date, no doubt Just before we get on out of here, mate.
Speaker 1:The other one I wanted to mention. Of course we do have our bike classification data for June. So great that we obviously give this data a bit sooner. We'll get that later in the week. Again, we might see some of that impact of the LVRs. We know that first-time buyers do tend to take advantage of the increased speed limit around less deposit, So we could see the first-time buyers stay really strong in June as well. But we'll delve into that next week. So, yeah, that's the key data source coming later on this week. But yeah, anything else on your mind, mate, I know that over the next week or two, with school holidays on, you and I will be on and offline intermittently and juggling children and things like that. But anything else on your mind before we close out for this week's podcast, Kelvin?
Speaker 2:I guess just around bike classification, maybe not necessarily in this set of figures, but over the next I might have said it last week too just I guess over the next three, six, nine months really keeping an eye on that investor line. There's a lot going on around investors at the moment and people thinking about selling. Are they actually going to sell? What's going to happen with the election Interested activity, dtis I think it's a really really interesting sort of area of the market and what's happening with tenants and all these things. So yeah, i guess just within, bioplassification might not necessarily be a theme for this month on its own, but the medium term definitely be watching that more wished MPO line to see what happens there, because there is some interesting stuff going on and pretty high profile stuff. So yeah, maybe not much change this month, but the medium term definitely worth watching.
Speaker 1:Yeah, i agree, and it's probably come up a couple of times, but maybe we need to get into the detail of it more as well. I did see something about size of investors right now and is it really difficult for you know what everyone calls the mum and dad investors buying their first investment property. Is it too tough for them? And we can obviously look into that detail, as well as the detail around movers too. So, yeah, it's such a great series that we can get into so much granular detail within it too, provide that insight to the market and understand really where are these changes happening. You know, when we see Luzer LVRs, who's taking advantage of those in the investor space, as well as the first home by a space. So, yeah, it's a great call out and just another one, i suppose, for us to put on a list of things to look into in the future.
Speaker 1:And on that note, you know it's a good, good chance to say you know, if you do it, you do have ideas out there and questions in the market and what's important to you and what you think you're seeing or hearing about. You want some data to back that up. Please do get in touch with us and give us those ideas about where you'd like us to analyse and what you'd want us to get into, because we've got some pretty amazing data, you know, in our database And we, you know we only sort of lack our you know nothing. We lack is the ideas. So you give those to us and we'll have to delve into the detail and see what we can. We can pull out of that detail in a future date too. So you're pleased to use that to get in touch, but there's nothing else on your mind, mate. I can close this out.
Speaker 2:Yeah, yeah, let's get into it.
Speaker 1:Last one. All right, mate. Well, thanks, as per usual. Thank you very much for listening and please do make sure you subscribe to the show And, as I said, get in touch with us, always keen to hear your ideas, thoughts and comments about what's going on the market. I'm just going to say thanks again. Thanks so much, and my name is Nick. He's Kelvin. You've been listening to the New Zealand Property Market Podcast, see you.
