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14 Nov 2016

Drop in Mortgage Numbers

The New Zealand property market is losing steam, with a sharp reduction in mortgage numbers recorded in September and home prices in Auckland continuing to taper off. According to figures produced by Myvalocity and published in the NZ Herald, the number of new residential mortgage registrations declined by a massive 21 percent in September, with Auckland figures down 26.2 percent from the same time last year, North Island metro centres down 15.6 percent, and Wellington and South Island metro centres down 2.8 percent.

According to Myvalocity chief executive Carmen Vicelich, "Mortgage registrations are a good indicator of the financial performance of the market [and] one of the most interesting trends we have seen for a while as despite good migration, record low interest rates and the price pressure that still exists in the property market, the number of mortgage registrations has consistently declined in recent months ... This is something we have not seen before. The property market is, to some extent, seasonal and traditionally we expect to see a rise in mortgage registrations in Spring, however this has not been the case so far this year."

The reduction in mortgage numbers is joined by a novel combination of factors that haven't come together for years, including low sales numbers, high supply levels, and slowing price growth. The number of properties for sale in Auckland reached its highest level in three years during October, as the number of sales fell to its lowest level in five years. According to QV's latest monthly House Price Index, Auckland house values increased 13.8 percent on an annual basis to $1,045,207 in the region and $1,209,199 in the city suburbs, the slowest growth rate since March 2015.

According to Barfoot & Thompson's managing director Peter Thompson, "The last time sales numbers fell this low in an October was in 2011 when the market was still not fully recovered from the 2007 Global Financial Crisis ... It is yet another sign the Auckland market is losing its forward momentum." While the high-end of the market is not particularly affected by current conditions, average asking prices are down as buyers continue to regain some of their long-lost bargaining power. The average price increase was 2.6 percent during October in Auckland, with average asking prices up just 1.8 percent to $865,000.

New LVR limits are also having an effect, especially for property investors looking to buy at the lower end of the market. Despite a reasonable selection of cheaper properties available in Auckland, only 40 homes, or 5.1 percent, sold for under $500,000. First home buyers in Auckland had a much more positive month, as the only sector of the market which saw a growth in mortgage numbers - up 4 percent from the previous month. While first home buyers are still facing challenges, there is more opportunity to buy lower priced homes in and around Auckland due to an increase in property numbers, more flexible sellers, and less competition.

 Image source: TypoArt BS /