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
OCR on hold, but caution remains
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Ever wondered how the unchanging official cash rate might influence not only the economy but also your personal life? Kelvin Davidson and I, Nick Goodall, get to the heart of the matter in our latest episode of the New Zealand Property Market podcast. We kick things off with a lively discussion about the recent Reserve Bank OCR decision holding the OCR at 5.5%, highlighting its 'wait and see' approach and the tell-tale signs of a relaxing labour market due to net migration easing skill shortages.
Excited to understand the potential risks of a slower rate of inflation? Well, strap in as we discuss how the constant OCR could impact inflation, financial markets, and your household expenses. We'll walk you through the ripple effect of the OCR rate stability on mortgage rates, using the jump from 2.8% to 5.1% as a case study for shaping the economic scene (David Cunningham on LinkedIn).
As we move towards the final part of our episode, we'll be shedding light on the potential upswing in the property market. The trends in rental prices, the cost of living crisis, and the influence of migration on the market are all on the table for discussion. We'll also be scrutinising the most recent sales volumes and house price index data from REINZ. Is there a potential for a 'dead cat bounce'?
Cordell Construction Cost Index for Q2
Monthly video up
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 Core Logic, produced by Agents TV, on 17 July 2023. I'm Head of Research and a Goodall, and I'm joined by Chief of Commerce Kelvin Davidson. Kelvin, how are you doing, mate? Manatee Matariki how was the long weekend?
Speaker 2:Oh, excellent, yep, three days off, or we actually had four days off with a bit of internal staff time. So yeah, four days seems like a really good amount of time just to just to truly switch off, and the weather around here was good, so just just chilled out and kids are back at school, back at Kindi, so so you know, the weekend did have that vibe to it that we're just at the final hurdle. So, no, it was really good, really enjoyed it, and great all-glass result on Saturday night. So so, yeah, feeling, feeling pretty nice and refreshed, busy week ahead, but um, but no, going good how are you?
Speaker 1:Yeah, yeah, pretty similar. Actually had that Thursday off as well. Like I said, we sort of get the afternoon off with these what I don't know what they call it at Core Logic, but these winter wellness days off and we get half a day for free. So, yeah, tacked on the Thursday morning off as well. So four days off, and made sure we sort of soar off the school holidays in style, with the me, karina and the two older kids having a bit of a closest, as close as you can get to a yesterday where they could choose what they wanted to do and ended up doing go karts out in Aparata, brutown, we went to Chipmunks at the bumper cars in town and then, like a time zone, arcade thing as well. So, yeah, good, good way to sort of actually spend some time together other than just the school holidays and working from home and then watch TV or whatever. So that was really good and otherwise.
Speaker 1:Risk of the weekend was good weather Matariki Festival on Friday night. I think it was and was amazing whether that night, which meant was really busy, which was great, but also very packed, so that was difficult, but yeah, and otherwise, like you said, the all blacks man, how impressive, gotta say, I could have with going through getting kids to bed and whatnot. I didn't quite sit down and watch the full game in full focus. But I just have to profess my man love for Will Jordan in the way sort of injects himself into the play at times and set up that trifle for Zell I think it was the second one on that night. But um, yeah, all blacks very impressive. And you know, in Foster maybe he's actually got something going this year. So certainly sets up some intrigue for later in the year, mate. So it's all go yeah, yeah, yeah, well.
Speaker 2:Well, jordan's attack is pretty good, but almost for me it was the defense. It was just, yeah, not not letting South Africa do their thing. You know, it was disrupting them and and almost at least having parity in those physical things, if not dominating. So so that was almost for me, the best thing, and and if we do that, we're always going to have the attacks to win games. So, yeah, for me that was, that was a really good aspect to it. As for as for a yes day, I mean I'm trying to be a yes parent as well with my four-year-old, but I try to, but I just find myself saying no all the time. So I don't know, I don't know how to do it, but but anyway, yeah, yeah, first world problems it's hard with this.
Speaker 1:So, uh, I'm reasonable. You know, like they have no, no gauge of what's what's real or not. Um, yeah, I think we could do it with a three-year-old. So, yeah, she was still a daycare, so he just dealt with the older two who are a little bit more reasonable and you can have a conversation with, rather than a three or four-year-old still toddler stage and very demanding. But, um, yeah, it was good, mate, it was good. Uh, okay, well, let's, let's get into it. And obviously, a pretty, pretty big thing to review last week although maybe there's not much to be said about it, of course the reserve bank having their OCR decision last week. It was all as expected. They stuck to a pretty true line from the six-week earlier statement, holding the OCR, of course, at five and a half percent. You did manage to write a short article in response to this. Um, what's the gist from your perspective? Any detail within that statement or anything else worth covering?
Speaker 2:I think I found it hard to to get much out of it.
Speaker 2:To be honest, it was pretty much nothing to see here they they just said you know it's but, I, guess, following on from what they said at the last meeting you know they would they've got the OCR to five and a half. They're in this wait and see mode and and really nothing had changed in the sort of five or six weeks since then to to make that path any different. So they just kept the OCR the same, reiterated what they'd been talking about previously, that you know signs of inflation coming down, signs of inflation expectations coming down, you know the economy is kind of ticking over it's. It's not sort of too hot, too cold, but some signs of the labor market maybe just loosening a little bit with that net migration coming in and sort of easing skill shortages. It's not sort of flowing through clearly to higher unemployment or anything like that yet, but at least some of those indicators relating to you know we just can't find staff are easing back a bit, so you know they'll take a bit of heat out of wages and that flows through to less inflation too. So yeah, really just really just business as usual. You know they follow through with with what they said they were going to do, which was, you know, keep it flat for a while from now on. So so yeah, really just just business as usual in terms of mortgage rates.
Speaker 2:I mean, you know the, the natural assumption is to say, well, ocr is peaked, so mortgage rates are peaked as well, and I think that's generally true. But there's obviously other influences on on mortgage rates as well what's happening offshore, but also what's happening just in competitive behaviour between banks. And, and you know pretty timely reminder over the past couple of weeks that even if we've got a flat OCR or OCR at a peak, you can still see changes to mortgage rates. And we've definitely seen that in the last week or two, not massive, and I think we're safe enough to say that we're pretty much at that peak. But that doesn't preclude small changes here and there as banks kind of try and win market share and, you know, react to that.
Speaker 2:So so yeah, I think generally at that peak for mortgage rates, scope for a bit of tinkering here and there. But also I think it comes through on the reserve bank commentary too that they're still concerned about inflation. So don't assume that the official cash rate is going to come down anytime soon. So I might have stopped increasing, but very unlikely to fall for at least another sort of nine to twelve months. So therefore probably higher for longer for mortgage rates too. So so yeah, just factor that into considerations as well.
Speaker 1:Yeah, exactly, and I think you know we sort of talked about last week that I had to film the monthly video before that decision and I was pretty confident in going into that writing that the Reserve Bank have not changed the OCR. I did check it out and had to record a little section where I said they had increased it, but I think you know we were as close to 99.9% confident it was going to be as it was. I know that you write your response article in advance of the release and then just go and change anything or modify things as well, so we'll be a peek behind the curtain of what goes on here. But I suppose that just shows that you know our expectation was pretty much followed through with which, as you said, meant it was as close to a non-event as possible. But there's still important things to be taken from that which I think you've touched on all there.
Speaker 1:I suppose there's a couple of things to talk about that will link to this as well.
Speaker 1:I know, first of all, we've got CPI inflation data for Q2 this week, so pretty much you know a big release on this one and one the Reserve Bank we know we'll be watching very closely this huge anticipation for this data. I know expectations are for a further fall and we know that, just to reiterate, q1's inflation figure was 6.7%, down from that peak at the end of last year, which was over 7%, and I suppose the key thing now is that the fallout will flow on from this data release could be big if it's above expectations, if it's below expectations. So I wonder if you just want to spend a few minutes just talking about the situation from an inflation perspective, where you expected to be what the market's expecting, and then, of course, you know what the Reserve Bank, what their read might be depending on what comes out here, and maybe we can. That's sort of a view to this week, of course, but maybe it's worthwhile touching on that while we're here on the OCR and mortgage rates.
Speaker 2:Yeah, yeah for sure, yeah. So we've got our Q2 CPI inflation out this week I think it's Wednesday right off the top of my head. So, yeah, big big release. Yeah, this is obviously the primary target number one for the Reserve Bank and, as you say, 6.7%, you certainly need to take a step back and go Jesus. It's still high, isn't it? You know we're all looking for this decline, but even if it does decline, it's still pretty high. And that relates back to what I just said about the Reserve Bank still being pretty concerned about it and not wanting to ease off monetary policy until they're absolutely sure it's coming down. So so, yeah, anyway.
Speaker 2:Next next figure I mean most expectations are at least 6%, somewhere around there. There'll be there'll be variations around that in terms of a forecast, but pretty much around 6% seems to be the expectation. So so you know, pretty big slowdown from that 6.7% and the peak before that which was 7.2%. So you know we are seeing inflation going in the right direction, but still pretty high, and that's something the Reserve Bank still concerned about. We're still seeing some things go up in price. There was the food price indicator last week which is still pretty strong. We'll talk about rents, but rents sort of creeping higher as well. So there's still things going up, but you know, then there's other things that are sort of slowing down as well.
Speaker 2:Now I've probably said it before, but keep in mind that inflation is a rate of change. It's not the level of prices. That's not really what the Reserve Bank is concerned about. So stuff might still cost a lot, but if it's not changing, then inflation will be slowing and that's. It's that rate of change that the Reserve Bank is about. So I guess don't get confused between how everything still costs a lot. That's not really the issue. From a monetary policy perspective it's a terrorist change and it gets a bit mathematical. But you know, if we saw a big rise in price for something a year ago, because the inflation rates annual comparison.
Speaker 2:That big rate of change, that big change in prices drops out of the comparison and mathematically that helps to reduce the inflation rate. Now, you know it's a bit sort of stato, but you know that does matter. So yeah, all about the rate of change. We're still seeing some things go up in price, like a safe food, but other things are coming down and then just mathematically, as as you know, big spikes in prices a year ago sort of fall out of the comparison. You see inflation slow down too. So so yeah, for me it looks pretty likely it'll slow us and that's what the Reserve Bank is expecting, that's what bank economists are expecting, that's what sort of anticipated by financial markets. So so it's hard to see, it's hard to see that being too much of a surprise in that regard, but still a pretty big indicator.
Speaker 2:You know, if inflation didn't slow as much, maybe it stayed at six and a half, maybe it stayed at six points seven you know that that would kick off some fears. You know it is inflation truly slowing. And do we have a bigger problem here to worry about and that would start to flow through to? You know the Reserve Bank thinking financial markets might sort of push up wholesale rates. So so I think central scenario definitely slows, but just that sense out there that you know we just need to be careful of getting too far ahead of ourselves.
Speaker 2:There is, there is that chance out there that doesn't slow as quickly and therefore there could be some fears at the Reserve Bank, but I think that's the that's the lower probability scenario right now. It's definitely that inflation slowing but got to hope it keeps slowing, because 6% I mean yeah it's down, but still extremely high. You know the room of the target here is one to 3%. So still a while till we get back there. And that's behind that, that view that I just talked about, how all the rates are high for longer because it's going to take longer to get inflation down. So so you look out for that central scenario. It slows, but just some risks around there.
Speaker 1:Yes, I expect that mid-range six low sixes and if it's not, if it's below that, then that's positive news essentially and could lean towards even the OCR coming down sooner than expected, depending on, again, what happens for the next couple of quarters. And if it's much higher than that six low sixes, then you're like I say, the fares start to grow about OCRD and they go higher to continue to fight that high inflation rate. So I mean that's a good little summary on that one. The other thing I want to talk about when we consider the OCR and what's happening in that space and the cost, mortgage rates and the impact that has on households, the amount they have to put towards their mortgage, which then flows onto their spending, flows onto the economy, talk about recessions, double dip recessions and how that flows on too. It's just an interesting article from David Cunningham, the CEO at Squirrel, and I just saw this on LinkedIn over the weekend and his argument was that the next move for the OCR should be down, and the biggest contributor there from his perspective was here. This chart in there which I quite look like which is probably not surprising, given I'm a data man and he's on. Someone throws data or a chart at me I sort of my interest perks up.
Speaker 1:But what he was looking at was the average carded two year rates. It's their average advertised rate, essentially for the banks, compared to the average current mortgage rate that households are actually paying, according to the Reserve Bank. So it says the average today people are paying is 5.1% compared to that two year rate at 6.8%. So there's a margin here of 1.7%. That's moved up from the average of a low of 2.8% in September 2021. So the average that all mortgages were being paid out was 2.8, even though we know some got lower than that. The average dropped to as low as 2.8%. So his point then is that it's increased 2.3, it's gone from 2.8 to 5.1. So we've increased by 2.3% the average interest rate that all households are paying. But if that does drift up towards that 6.8% state says around that 6.8% rate for a fairly long period of time, you're going to see more and more people drift towards a rate around about that. You know some might get a three year rate at whatever six and a half. Some will be on a one year rate at seven, the average being about that 6.8%. If that's the case, then there's still a 1.7% increase for households to shoulder, and so the point there is that we've moved up to 2.3 and 1.7 to go.
Speaker 1:So his big line said you know, we've only had 60% of the increase that's being burdened by those households right now. There's still another 40% to go and you know, I think it's an interesting perspective and to me, you know, maybe it's some reading too many of these perspectives where someone could do a long way to go. I know we always talked about the fact that we've been through a significant adjustment phase in terms of interest rates going up and we haven't had too many problems in terms of a raise, in terms of, you know, looking like people are struggling and that's helped out by low unemployment, of course, but it just does feel like this is sticking around longer. We know that's been adjusted. You know the maybe I've moved into higher interest rates and they've adjusted their part. You know their spending habits for six months, but can they continue to do that for a year or two with these high interest payments? So is there still some of that you know, potential problem to come? It's, I guess you know maybe I'm just leaning towards becoming a bit more pessimistic about our, you know, about things and the challenges to come for the rest of this year.
Speaker 1:What that means for the economy especially and the point there, though, says that if we do see people struggling more and we do see a few more problems, we do see a few people spending, we see a greater recession than otherwise expects, then absolutely that is the situation which would cause the OCR to come down Sooner rather than later, and I suppose this is probably where the debate rages on is to say you know how is? How is the economy going to pan out this year? What does employment look like and, of course, where's inflation at? But less spending should mean less inflation as well. So you know, that's where it's all tied together, and this, to me, is the biggest center of intrigue right now, where you can have a debate for a long period of time about where this is going to land, and that's why everyone talks about it being data dependent. We wait and see what happens.
Speaker 1:You know there are all these factors which we're not quite sure how they're going to play out, and then, like you said, we bring in the international side of things. You know, the other central banks around the world, still some of them in the tightening cycle, some of them have dialed back. But there's all these factors to watch for and probably makes our job, you know, and one of the most interesting periods, certainly since I've been in this type of role, because there's just so much going on there as well. So, yeah, I don't know, it's just there's just so much going on there. Definitely worthwhile considering that viewpoint.
Speaker 1:And and yet obviously you know we'll talk about this shortly as well but of course the Ryan statistics came out and you know there's probably for anyone that owns the property, has a mortgage, you know there's a, there's a positive news there with the first lift on the house price index in June, but it still feels like you know that we're not going to.
Speaker 1:I mean, we'll talk about this for a while and you know we're not going to see strong growth come out the back of it. But I do wonder if you know there could even be a bit of a false, you know, bit of hope in there with this increase in the index and it might drop again. You know, in my volatility we've set up and down over a couple of months period before we actually getting stability either. So, yeah, not really sure where I'm going with that one. I suppose it's just a bit of a mindset shift for myself. Not sure where you're at recently, maybe from conversations. You're having the data. You're seeing where you kind of sit with this. You know what you're expecting for our economy for the rest of the year and anything else you want to add there, before we sort of look at the other couple of data releases from last week.
Speaker 2:Yeah, I mean I think it's probably largely consistent with what we've been saying. You know we've anybody's seen one of our presentations and I guess to some extent media commentary will have well, hopefully, picked up on the cautious view we've had around this refinancing. And still, you know, 50% of borrowers rolling over and they're still looking at it. We've got a chart of a one year change and a one year fixed rate and anybody repricing in the next six or 12 months still looking at that increase in mortgage payments. Like you say, it's a while until we get to the situation where people reprice from a high rate to a high rate. They're still going from low to high at the moment and that will continue.
Speaker 2:So yeah, I guess we've you know we've been, we've been talking about that for a while. Yeah, interesting to put that number on it, that that you know they've gone from two and a half to five mission and got quite a bit further to go. So, and yeah, you look at what this means in dollar terms, you do have to wonder how, how are some people coping? Because it's, you know, while you've got wider inflation as well, that's that's taking real money out of your budget then. Then you're looking at a high mortgage payment as well and, yes, not everyone pays a mortgage and people rent. Some people don't have a mortgage. So there's, you know, there's you got to keep in mind that wider context. But definitely, definitely it's a challenge and we flag that up.
Speaker 2:I suppose for me, still the key, the key thing here is the labor market. We've talked about the labor market for ages has been the key thing. I mean, you know, if you've still got a job, you've got a sense of job security, you've still got your income, you'll probably find a way through anything. That's, that's what we're seeing so far. There's no guarantee that it will continue, like you've just said. But you know that has to be the. For me, that's, that's the key thing to keep an eye on and, you know, even if we see unemployment go up, might not necessarily be because of job losses. Just, you do have that, that bigger labor force element. Yeah, yeah, a lot to a lot to keep watch on. For me, the labor market is still the big thing.
Speaker 2:I think in that wider context we've also talked about how, just because a downturn ends doesn't mean an upturn starts. You know, there's there's lots of restrictions out there. The repricing thing is one of them. But also we've talked about how, you know, house prices don't really go perfectly flat. There might be bursts of growth and a little mini downturn, like we saw after the GFC. They went up and went back down again, sort of a second round downturn. So yeah, I could readily imagine, you know, some the sentiment gets a bit more positive, things take up for a while, maybe some repricing pressure comes through, prices go down a bit again. So yeah, I think we are looking at a 12 or 18 months of you know, patchiness could be the word and, like you wrote about in our latest index release, that kind of inconsistent growth, some, some markets up, some down. I think that's probably what we're looking at the next little while, with that repricing thing being being a big part of it. So, yeah, it's definitely a big element to the market at the moment.
Speaker 1:Yeah, yeah, I just think there's there's lots there, and if you had a scale of, you know, optimistic on one end and pessimistic on the other, with you know cautious in the middle, and I think we've been in that cautious realm. I think my mind just recently switched from you know that middle cautiousness just a little bit more towards the pessimistic and being a little bit more concerned about how this might all play out. And but, as I said, it is moving and there are different, different interactions and conversations and data that comes out that that swings me either way over time as well. So, yeah, certainly plenty going on there, and I think part of it was you know it's been at the start of the month that was right in the video during the week and and looking at that data from the Reserve Bank that looked at mortgage origination date and when that was likely to come up, and we've talked about this you know there's a bit of a jump in September and October. That's quite large in terms of people repricing. Some of those people will be moving off that two year rate around about you know, three odd percent, and so they're certainly in for a bit of a shock there as well, and just knowing that what that's going to do the House of finances is going to squeeze them and that will flow through to a weaker economy, and that's just all those things, I think, that are just weighing on my mind and just changing maybe my, my starting viewpoint in terms of you know my expectations for the rest of the year, and I think that's a good point. You know the 18 months of patchiness, you know, maybe that is that is the way to talk about it, because it's certainly not going to be all one way and the regional differences will will certainly be there too, and that's something I put in the video, right was you know what's the impact of this if you're increasing from what percent today's percent, how much that means, and your extra mortgage repayments for a hundred thousand dollars a debt or a $300,000 mortgage. You know it's really painting that picture of the impact of people and what we've seen decent wage growth as well, which is probably helping things out. That can't cover it all necessarily. So, yeah, just want to keep that level of cautiousness there. I suppose and that's probably the main point of where my head's at recently We'll move on then, mate, from the broader OCR and just rate chat and everything, and there are a few other releases.
Speaker 1:Last week, though, and probably was almost linked to inflation in some ways, is, of course, the Coredow Construction Cost Index for Q2. So this is our own release. Of course you wrote that release and it led that one to media, which there was quite a bit of coverage with, I suppose, because we're seeing that rate of growth and construction cost thankfully starting to finally slow down. As you said, it's still going up and that's probably the key point from the inflation data is that, this rate of change, but going up at a much, much slower rate than it was over the last few years. So, yeah, do you want to just take us through some of those specific details of that and maybe anything of note from the conversations you had following that release last week?
Speaker 2:Yeah, it was definitely a slowdown here. We've been talking about the wider construction industry slowing down in terms of activity for a while now. So net dwelling consents are tailing off Now, maybe workloads on the ground not entirely sure, but probably holding up to some degree because builders are sort of moving through that previous pipeline of consents, but it's sort of all moving in that direction. The industry slowing down capacity probably not quite so much of an issue as it once was. Supply chains are obviously a lot freer than they were a couple of years ago, so now it's all sort of just easing a little bit, and we're seeing that in cost growth, which is what you'd expect and we've seen.
Speaker 2:So we saw a 0.6% increase in the CCCI, or the just basically cost of construction, in Q2. The annual rate was 6.4%, so still above average. It typically runs at three or four, so that annual rate still above average. But go back to the end of last year and it was 10%. So construction cost growth definitely slowing down, consistent with that wider slowdown in the industry.
Speaker 2:Like you said, though, it's not getting cheaper, so this isn't sort of negative cost growth or prices falling.
Speaker 2:This is a slower rate of increase and so, yeah, I think that I don't think a new bill is necessarily going to get much cheaper, because you think about labor is 40, 50% of the overall cost of a build, that's unlikely to go.
Speaker 2:Wages don't go down, so that's unlikely to get cheaper. So that'll sort of keep some sort of floor under the level of cost to build a new build, but at least won't be growing as quickly. So certainly a lot of this is coming through the material side of things as opposed to labor. So yeah, new builds unlikely to get cheaper, but at least the rate of growth is slowing down and that's going to be feeding into that wider inflation picture which is encouraging from that monetary policy perspective. So yeah, don't think it'll get cheaper, but at least the rate of growth is slowing down. Might give some comfort to people thinking about a new build project or a renovation or whatever it is. The cost growth won't be quite as fast but probably still going to go up to some degree. So yeah, that was basically the gist of the media coverage, I guess.
Speaker 1:Yeah, I think the last two quarters were like 0.6% growth, so it's relatively contained. And, as you said, if the average is 3% or 4%, that's what? 0.7% to 1% growth per quarter. So it's actually slowing down pretty well and for two consistent quarters. So, yeah, there's certainly some good signs in there in terms of that growth not continuing to grow at that same old rate but still increasing. So you don't forget that either, Cool mate. A couple of statistical releases or economic releases, maybe sticking along the inflation side of things rental price growth for June was released by Stats New Zealand, and then I mean kind of tighter than I suppose we've been talking about what's happening from a migration perspective. The data is only for May and did show that that growth was slowing. So yeah, you want to run us through those two releases and then we can maybe a little bit of time on the Ryan's stats that were out for June as well, before we, I think, pretty much close us out for the day. So you're back to you on those economic releases, Kelvin.
Speaker 2:Yeah, but probably start with the migration figures so that, like I said, they relate to May. There's about 4,900 people in net terms that arrived in the country. So you've still got departures but we had a lot more coming in and that total net figure for May was 4,900. Now that's down a lot from where I was a couple of months back, which was more like 14,000 in an individual month. So people, I guess, saying now, well, it looks like we've already peaked and migrations slowing as well and consistent with a lot of other things. But I mean 4,900 people, it's still pretty high. If you annualize that at times of by 12, you've got what 59,000, 60,000 people on a net basis, long run averages. And it never actually kind of sits at the average, it's always up and down. But if you average it all out, it's kind of 25 or 30,000 on an annual basis for total net migration. So just still have. And so what? That's 2,500 a month. So just still have 4,900. It's still, you know, yes, it might be slowing, but it's still way above average. And the key point is that over the past year, six to 12 months, it's been high each of those months to the point where I think the annual total over that period is something like 78, 79,000 people in net terms. So yeah, migration could be slowing.
Speaker 2:It's sort of the net result of two big numbers, so it can swing about from month to month, but I think the bigger picture is it's still a lot of extra people in the country. You know people who have lived somewhere where they may well, on average, rent first for a start, at least get established. You know sort of sort of the jobs, sort of sort of where you want to live, all that sort of stuff. So it might show up first in terms of rental demand. But you know somebody has to own that property or buy it in the first place. So you know, either way it's still a. I think there's a boost here for property prices. It's simply more demand, more people in the country. So that's one thing. And then, yeah, if it does show up first in rents, well, yeah, the evidence isn't necessarily clear cut just yet, but it might be coming through.
Speaker 2:We saw those stats NZ rent price figures for June. The annual increase was three and a half percent. So you know not, not sort of off the charts, the average is sort of three or four. So it's probably still running about normal. That was a bit of a slowdown actually from 3.8% in the previous month. So you know, rental growth for now is sort of just taking along an average bar. It has increased a little bit. Go back six to 12 months and that annual pace of growth was sort of half percent, one percent. So we're just, there is maybe some signs of rent-a-growth accelerating. It's not off the charts yet but there's always going to be lags here. You know net migration will take a while to sort of be seen in the rent figures.
Speaker 2:So yeah, I think balance of risks. You have to think that that big surge in net migration will probably flow through to an acceleration in rents over the next little while, maybe not seeing it just yet, but I think it's. There's a fair chance it'll come through. But some restraint there from the fact that the rents are already really high on relation incomes. So yeah, there's only so much, only so much stretch that the tenants can manage, and so I think that'll be a natural handbrake on things. But you do have to think that we might see a bit more rental growth just off the back of that migration. So yeah, I wonder what you're wondering about.
Speaker 1:Yeah, I wonder, like again, one month trend in terms of that rate slowing down, and so we don't want to take too much from that in terms of being a trend, but it does maybe provide more evidence to the argument that says, you know, rental growth is much closer tied to tenant income, and if we're just not seeing that same growth in incomes right now, you get more people coming into the country, but if people can't afford to pay the rent that's being advertised, then we're not going to see that same growth in that rental price that we have in the past. So, you know, I might just show that. You know, with this cost of living crisis and everything else going on, people simply can't afford that, and so they'll be looking at other ways of living, and it might mean more people to a household, it might mean staying at home longer, whatever it is, just to reduce the you know your overall costs. And that means that you know there's this few people actually out there not fewer, but maybe not as much as many people out there looking for a rental property willing and able to pay the amount that's being advertised, which is where that growth would come from. So, yeah, I mean there's all those little things, right, those hidden households and all those things that have to be considered here. That might mean that, yeah, you know, strong migration doesn't flow through to, yeah, direct correlation and growth in rental prices too. So, yeah, there's always, there's always a number of things to consider there, I suppose, and maybe, as I said, it's only one month, but if we do see this trend continue, then maybe it does show that, yeah, things are just that tough out there and tenants can't afford it, and so we won't see that same growth in the rental price index anyway. So, as you say, they want to certainly watch for both of those two series from Stats, new Zealand let's look at the Rhinetowns price index then, mate, and I suppose there's sales volumes data as well, of course.
Speaker 1:We saw another month where the year on year increase happened for sales volumes, even though June sales volumes were lower than Mays. I suppose we need to point that one out first. But perhaps more significantly, the raw monthly house price index increased for the first time since November 2021. And I say you know raw, because we've seen some seasonal adjustments and we've seen the index increase off the back of those, but that's you know now if that is the end of the downturn. That would be a 19 month downturn.
Speaker 1:So you know you mentioned earlier that there's, you know there's potential for the old dead cat bounce here where we see some growth. But you know things, things see some weakness in future as well. So we don't just see strong growth or any growth continue for a period of time. But certainly this is the first genuine sign sales volumes continuing to grow on a year on year basis, the index now turning up as well. You know certainly some tentative signs that yet we can. We can be more comfortable when the bank economists have called the downturn or the end of the downturn already, will feel more confident off the back of the starter anyway. But we still need to point out there's going to be some regional differences, of which there are across the Rhinetowns House Price Index too. So, yeah, your take on maybe sales volumes or any detail from the index you checked out, kelvin.
Speaker 2:Yeah, I suppose definitely the tone of the commentary off the back of these figures was, you know, down and turns over. Now we should start looking at the upturn. And yeah, I think you have to look at the figures we've seen. Yeah, sales volumes up year on year for two months in a row now. So you know signs that that activity is building up. But that'll lead into the stock of listings. You know that creates a bit of competitive pressure flows through the prices. So, yeah, you know early days, you know had how many months of figures do you need before you truly call it? But I guess everyone's been waiting for the signs of this to come through, the fundamentals kind of point to it. So it's now feels to be there.
Speaker 2:But again, coming off a low base. I mean sales activity. Yes, it might be up two months in a row, but I had to quite look at where it normally is for this time of year and the volume still like 20% below normal. So coming off a very low base. So keep that in mind and yeah, just that cautious view we put across earlier. But you know, end of the downturn doesn't necessarily mean a sort of rapid upturn and there's a lot of challenges still out there. So, yeah, looks like it's there. But let's not get carried away. And certainly, yeah, I'd be really cautious of because of the natural thing that happens. You know people do go end of downturn, great start of upturn, and you know you suddenly see forecasts of 10, 20% growth in house prices and everyone, sort of everyone was racing to call how far they go down and then everyone suddenly switches around to racing to see how fast they can go up. So you know I'd be cautious about that.
Speaker 2:But in terms of prices, yeah, the index was up point for kind of Auckland stood out. But you know most most of those Auckland sub markets or old, you know TA areas were looking a bit stronger. But it was across most parts of the country really that we saw prices go up in that single month. Bits of Wellington, parts of the South Island, queenstown's been just sort of going up the whole way. So yeah, nothing's changed there. So, yeah, I'd say it's. You know signs of that turning point are definitely there. But yeah, let's not, let's not get carried away. And you know, like we just talked about the refinancing thing could mean that there's doubt, there's there's many bouts of falls coming up before you get another bout of increases. So I'm so yeah, it was you know, for those that are looking for an upturn, it's that you know there's the support there, but I think also just some some caution as well.
Speaker 1:Yeah, yeah, and that's that's certainly coming. You know my tone as well and I think it's good to have that. Those expectations and check to and and you know as well, well, well, summarise there In terms of you know, our upcoming week. I've got a few presentations actually, so looking forward to a couple of them, virtual and some in person. So looking forward to getting out there number of different groups across different industries too. So I'll be really interested to see how we're at us is feeling this week, and I know that our big release this week, where all of your commentary you'll obviously you'll have seen include is in our monthly chart pack as well. So that'll be coming up this week. So look out for that one where you kind of get the full download of all the data that we're tracking to get our read on the market. So look out for that release as well. Anything else on your mind, calvin, or anything else this week that you wanted to chat about before we close out and get on out of here?
Speaker 2:No, no, that's that, that's it. Yes, cpi on Wednesday pretty, pretty big release, so we'll see what it says.
Speaker 1:Yeah, no, good call. Yeah, we'll soon to be hugely waiting for that one. Oh good mate. Well, I'll send us out of here. So thanks so much as Peersha, for your thoughts. Always good discussion for our Monday morning. Appreciate it, and thank you very much for listening. Please do make sure you subscribe to the show and feel free to get in touch too. We are available on LinkedIn, twitter or our email address is also sitting within the podcast. Play listening through right now. Just let me say thanks once again. My name is Nick, he's Calvin. You've been listening to New Zealand Property Market podcast, mata o a.
