NZ residential rental market news, February 2

Property prices rise to start 2024, dwelling consents tumble, and a 'Shantytown' is deemed compliant.

Too long; didn't read? Here're this week's TLDRs...

Property values rise (slightly) in Jan 2024

CoreLogic House Price Index increased by 0.4% in January, marking the fourth consecutive monthly rise. 
Property values have grown by 2.5% since September, reaching a national average of $928,184, which is 11% below the recent peak. 
Wellington and Hamilton experienced mild growth (0.1% and 0.2%) in January, while Tauranga and Dunedin saw gains of at least 0.6%. 
Chief Property Economist, Kelvin Davidson, emphasizes the tentative nature of the housing market recovery, noting variability across regions. 
Auckland's property market is turning around, with Franklin showing the strongest rise (2.1%) in average property values in January. 
Wellington's sub-markets generally saw growth, but Porirua dropped by 1% in January. 
Provincial markets show variability, with Gisborne and Napier bouncing back in January, while Rotorua and Hastings saw a dip. 
Queenstown stands out with a 0.7% increase in January and 6% higher values than a year ago, reflecting strong demand. 
Overall, the property market is expected to see higher sales volumes and house prices in 2024, with variability across regions and potential shifts in activity for first home buyers and mortgaged investors. 
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ANZ: House prices to remain flat until mid year 

ANZ economists anticipate house prices to remain steady in the first half of 2024. 
Forward market indicators show softness, with elevated inventories and sluggish sales. 
Expectation of a rise in house prices in the second half of the year as mortgage interest rates decline. 
ANZ revised their OCR forecast, expecting the Reserve Bank to initiate 25 basis points Official Cash Rate cuts, starting in August. 
They acknowledge the uncertainty in the timing of these rate cuts and don't rule out the possibility of a hike in February. 
ANZ believes the new Debt-to-Income mortgage lending limits by the Reserve Bank are unlikely to impact much this year. 
Loosening loan-to-value ratio restrictions may provide modest support for house prices from the second half of the year. 
Despite tweaks in house price forecasts downwards, ANZ expects a 2% lift by the end of the year. 
ANZ is New Zealand's largest mortgage lender, with over $105 billion worth of exposure.
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Dwelling consents continue to tumble

A downturn in residential construction and new home supply is anticipated later this year as the number of new homes being consented continues to decline. 
According to Statistics NZ, 37,239 new dwellings were consented in 2023, marking a 25% decrease compared to the 2022 figure of 49,538. 
The data suggests that new housing starts likely reached their peak over 2021 and 2022, with more than 49,000 new dwellings consented in each of those years. 
The most significant decline was observed in the apartment category, with only 2,518 units consented in 2023, reflecting a substantial 42.6% decrease from the 2022 figure. 
This was followed by stand-alone houses (-26.8%), retirement village units (-23.3%), and townhouses and units (-19.3%). 
The total construction value (excluding the value of the land) of the new dwellings consented last year amounted to $16.5 billion, marking a notable decrease of $3.8 billion (-18.6%) compared to the 2022 value. 
Across regions, the most substantial declines in the number of dwellings consented in 2023 compared to 2022 were recorded in Tasman (-43.9%), Wellington (-37.3%), Northland (-33.1%), and Auckland (-27.3%).
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OneRoof House Price Report

OneRoof figures show property values rising in 90% of New Zealand suburbs. 
Arrowtown, Mataura, and Whitford experienced the biggest quarterly lifts. 
Queenstown-Lakes suburbs had the strongest growth, with Southland, West Coast, and Canterbury benefiting from first-home buyer activity. 
Remuera and Omaha saw property value declines due to a soft end to 2023. 
Nationwide, house price growth was slow in January, growing just 0.9% to an average property value of $973,000. 
West Coast had the biggest quarterly rise at 4.7%, while Waikato and Gisborne slid marginally backward. 
Auckland's housing market experienced a halt over the holiday period, with average property value up 0.1% to $1.324 million. 
Queenstown-Lakes is the leading major metro with 4% quarter-on-quarter and 6.3% year-on-year value growth. 
Christchurch saw a 4.8% year-on-year increase, while Tauranga, Wellington, and Hamilton showed signs of summer fatigue. 
Stock levels remain low, but new listings in Auckland are rising. 
Valocity CEO Helen O'Sullivan notes the Reserve Bank's proposed debt-to-income ratios may limit house price growth in the next upswing. 
Mortgage registrations for first-home buyers dipped to 44%, and for investors increased slightly to 23.6% in the last quarter of the year. 
O'Sullivan mentions the impact of lower interest rates on house prices and speculates on future Reserve Bank actions based on the December quarter's CPI figure of 4.7%. 
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What you should know about the housing market this week – Kelvin Davidson

Consumer price inflation slowed from 5.6% in Q3 to 4.7% in Q4, reducing cost of living pressures. 
The slowdown in inflation decreases the likelihood of an official cash rate increase, and discussions about a possible rate cut in August are emerging. 
Debt-to-income ratios may be introduced around mid-year, but loan-to-value ratio rules are expected to ease simultaneously. 
The Reserve Bank proposes allowing up to 20% of lending with high debt-to-income ratios while easing deposit requirements for certain borrowers. 
First home buyers accounted for a record 26% of property purchases in 2023, tapping into KiwiSaver and benefiting from low deposit lending allowances. 
Investor activity might become more appealing in 2024 due to factors like rising rents, eased deposit requirements, potential lower mortgage rates, and increased mortgage interest deductibility. 
The NZ Activity Index for December suggests moderate economic growth, and a positive GDP growth figure of around 0.3% in Q4 is anticipated. 
Economic data to be released includes filled jobs data for December and ANZ's sentiment indicators for both business and consumers in January, with signs of softened job growth or economic sentiment keeping recession concerns present.
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Mortgage and loan repayment arrears rise

Home loan arrears in New Zealand rose to 1.4%, with 20,800 mortgages past due in December. 
This marks a 21% year-on-year increase, with the last higher arrears recorded in March 2020 at 1.49%. 
The rise is attributed to interest rates and cost of living increases over the past 12 to 18 months. 
Homeowners with high mortgages and low-interest rates are disproportionately affected by the increase in interest rates. 
Mortgage stress is expected to rise further, with 55% of existing mortgages still to be repriced to current rates in the next 12 months. 
Consumer arrears across all loans increased to 12.1%, with 439,000 people behind on payments in December. 
Centrix managing director highlights concerns, indicating challenges for households under financial pressure until there is relief in interest rates or cost of living.
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Doubling down on OCR cuts being some way off

In an RBNZ webinar, Chief Economist Paul Conway notes that downward revisions to economic activity don't negate inflationary pressure. 
Stats NZ's GDP data revision doesn't imply significantly lower capacity pressures in the economy. 
Weaker real government expenditure contributes to GDP revisions, while private demand, influenced by interest rates, is mostly revised up. 
Net inward migration is revised up, with almost 130,000 net gain in population, contributing to alleviating labour shortages and impacting housing rents and construction costs. 
Monetary policy is effective, slowing the economy and reducing inflation, but there's still work to do to reach the target midpoint of 2% inflation. 
Conway's hawkish tone pushes back on market expectations for policy easing, indicating a focus on the midpoint of the inflation target. 
Financial markets prematurely expecting OCR and interest rate easing, but Conway's comments suggest policy easing is still some way off. 
The Reserve Bank's monetary policy committee is expected to hold the OCR at 5.50% in its next decision on February 28.
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OP: Historical and international impacts of DTI restrictions

The Reserve Bank announced debt-to-income restrictions (DTIs) to link borrowing to incomes. 
Average household income has grown over 5% per year recently. 
Not every Kiwi is maxed out; the average DTI per household is 1.65x. 
Average DTI for Kiwis with mortgages is estimated at only 4.5x, below the new limits. 
Overseas examples (Ireland, Latvia, Norway) show house prices can still rise with DTIs. 
International evidence is mixed; Reserve Bank acknowledges varying impacts on house prices. 
House prices in Auckland and elsewhere may still increase, but DTIs will moderate market heat. 
Predictions: Expect more conservative growth, around 6% in Auckland and 5% elsewhere. 
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Aux rents rise 5.2% in 2023

Auckland residential rents rose 5.2% in the last year, reaching a new high of $662/week. 
This is the largest increase since 2015, when rents rose nearly 7%. 
Eastern suburbs are the most expensive for tenants with an average of $734/week, while Franklin and rural Manukau are the least expensive at $586/week. 
One-bedroom rents across the city rose the most, up 6.4% in the latest quarter. 
Auckland CBD apartments saw the greatest increase in weekly rents, up 9.91% in the year to December. 
Auckland faces a shortage of rental homes, with constrained supply and lower turnover as tenants and landlords prefer longer-term tenancies.
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Why shouldn’t you rule out a sharp rise in Aux house prices

Auckland house prices have risen 4.2% since May, outperforming the rest of the country at 3.5%. 
Population growth in Auckland is boosted by record net migration inflows, with 2.8% growth compared to 1.7% outside the city. 
Increased population growth hasn't yet significantly impacted price growth due to strong recent housing supply growth in Auckland. 
Over the past decade, consents for new dwellings in Auckland increased by 136%, while outside Auckland, the increase was 45%. 
Auckland's recent house price decline (23% from late-2021 to mid-2023) is attributed to increased housing supply. 
Current data indicates a faster decline in consents for new dwellings in Auckland (37% in three months to November) compared to elsewhere (25% decline). 
Predictions suggest potential Auckland house price outperformance compared to the rest of NZ in 2024-25, considering reduced consent issuance. 
Regional variations exist, with Wellington and Queenstown seeing price increases (7.1% and 8.8%, respectively), while Northland is down 1.3%, and Waikato is up only 1%. 
Historical data suggests strong population growth eventually leads to construction growth, impacting house prices. 
Despite Auckland's average annual population growth of 1.7%, Southland and Taranaki show comparable house price increases at 5.7% and 5.6%, respectively, with lower population growth.
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Auckland ‘shantytown’ deemed ‘compliant’

Auckland property owner may be allowed to keep makeshift sheds built without consent to house illegal immigrants. 
Auckland Council issued a Notice to Fix in October after an investigation revealed unauthorised structures on the New Windsor property. 
Compliance officer recently visited the property and found that unauthorised plumbing and drainage works had been removed from the shed. 
The shed appeared to still be inhabited, but the council plans to check if tenants move out in the next two weeks. 
Council has no authority to remove occupants but may consider further enforcement action if necessary. 
Tenants reportedly paid between $120 and $150 in rent for living in the sheds and caravan on the property. 
Previous tenant, an overstayer from Indonesia, mentioned that the shed occupants faced challenges after the council's compliance order. 
Authorities are aware of the situation, but overstayers living in the property do not qualify for support, according to Immigration New Zealand. 
A complaint was made a year ago to INZ by Migrant Exploitation Relief Foundation about the alleged exploitation of Indonesian overstayers by a construction company.
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Wanaka rich-lister to develop Timaru site

Wanaka property developer Allan Dippie expands to Timaru, citing the town's prosperity and growth. 
Dippie purchases a block of shops, office premises, and residential properties near the new Showgrounds retail development. 
The properties are currently vacant, and Dippie plans development but is undecided on specifics. 
Dippie, known for Willowridge Developments, dismisses the possibility of a Nichol’s Garden Centre on the site. 
The Dippie brothers are involved in real estate, property development, construction, landscaping, and retail. 
Timaru sees recent developments, including Fastlane Car Wash and relocation of PGG Wrighton's rural supplies store. 
Some businesses in the area face challenges due to roadworks and traffic delays. 
Delays in the replacement of Taitarakihi Creek box culvert cause frustration for local businessman Darryl Pyke. 
Culvert work is part of The Showgrounds development, and NZ Transport Agency is involved in legal contract issues with Redwood Group. 
Short-term delays for road users are expected at the intersection and culvert until permanent repairs are completed.
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House prices balloon in what was once NZ’s “cheapest place to own a batch”

Mangakino, Taupo, once known for cheap bach ownership, sees house prices near Lake Maraetai now exceeding $1 million. 
Average property value in Mangakino almost doubled to $510,000 in the last few years. 
High demand for lake-edge homes on Korari Road, with premium prices ranging from $1 million to $2 million. 
Taupo District Council invests in town infrastructure, including lakefront upgrades, leading to a 90% increase in CVs between 2019 and 2022. 
While prices have surged, Mangakino remains affordable, with most houses priced between $400,000 and $800,000. 
The town attracts buyers seeking a quieter life, with some selling homes in major cities and buying in Mangakino to reduce mortgages. 
Recent events and attractions, like wakeboard championships and summer concerts, boost Mangakino's popularity as a holiday destination. 
Market downturn affects Mangakino early and recovers late due to its status as a holiday destination. 
Majority of homes built between 1940s and 1980s; some new sections being developed, but limited land for town expansion.
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