Property Apprentice Podcast

Stable Rents Across NZ: Has Supply Finally Caught Up with Demand?

• Debbie Roberts • Season 3 • Episode 38

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 Hi everyone, I'm Debbie Roberts, owner and financial advisor at Property Apprentice. Join us today for the Week in Review where I talk about current events for the everyday investor and home buyer. Our topics for this week, topic number   📍 one from interest. co. nz on the 10th of October. Statistics New Zealand figures show household net worth dropped by 47 billion dollars in the June quarter, while total income fell for the 2016.

  Topic number two from   📍 1News on the 9th of October. OCR cut reaction, brighter days ahead as rate relief coming.  Topic   📍 number three from interest. co. nz on the 8th of October. New Zealand Banking Association says despite tough economic conditions, the vast majority of New Zealanders are managing their financial situation well.

 Topic number four from   📍 Trade Me on the 8th of October, spring trend or market rebound, house prices bounce back.  Topic   📍 number five from interest. co. nz  on the 10th of October, rents are static around the country, suggesting supply and demand are reasonably balanced.   

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 Topic number one. From interest. co. nz on the 10th of October, Statistics New Zealand figures show household net worth dropped by 47 billion in the June quarter, while total income fell for the first time since this data series began in 2016.

The June 2024 quarter was challenging for households as highlighted by Statistics New Zealand's latest data on household assets. The report showed a drop in household savings, a decline in net worth, and significantly, the first fall in total household income since the data series began in 2016. 

Household savings turned negative with a deficit of 479 million in the June quarter, a reversal from the previous quarter's surplus of 1. 1 billion. This decline occurred as household spending rose 1 percent to 59. 7 billion, driven primarily by spending on services and non durable goods such as groceries.

Meanwhile, household net disposable income fell by 0. 9 percent to 59. 2 billion dollars and total income decreased by 0. 2 percent. Statistics New Zealand explain that net disposable income represents the funds households have available after accounting for income sources like wages and taxes.    Westpac Senior Economist Satish Ranchhod observed that household finances are still under significant pressure. Adjusting for population changes, he estimated that disposable income rose by 2. 8 percent in the year to June, which lagged behind the 3. 3 percent increase in consumer prices. Ranchhod said  slowing income growth, high interest rates and rising living costs have squeezed purchasing power.

However, he noted that inflation is easing with expectations that it will fall below 3 percent soon and the Reserve Bank of New Zealand's recent 50 basis point cut to the OCR may help households in the coming months.  While Ranchhod predicts a slow recovery in spending due to weakening labour markets and rising unemployment, he noted improved business and consumer confidence, albeit for the longer term,  as opposed to the next three months, which data showed to be a little bit depressed.

As borrowing costs decrease, gradual economic growth in spending may pick up later in the year. Statistics New Zealand also reported slower wage growth in the June quarter,  with wages and salaries increasing by just 0. 8 percent lower than the average of 2. 1 percent from late 2021 to early 2024. 

Additionally, self-employed income and dividends both decreased during the quarter. Household net worth fell 2%, or $47. 1 billion, to $2, 311 billion in June, marking the first decline after three consecutive quarters of growth.  Despite this quarterly decline, household net worth grew 1 percent over the year to June 2024. Household liabilities increased by 0. 7%, driven by a 0. 9 percent rise in housing loans, while consumer and student loans declined. Ratnayake explained that the fall in household assets reflected the drop in property values for both homeowners and landlords. 

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Second topic for this week in review from 1News on the 9th of October. OCR cut reaction: brighter days ahead as rate relief coming. The Reserve Bank's decision to cut the official cash rate, OCR, by 50 basis points has been welcomed as a relief.  The bank based its decision on inflation moving within the 1 to 3 percent target range, and approaching the 2 percent midpoint, which was their target point.

In response, major banks quickly reduced their interest rates.  The Reserve Bank's Monetary Policy Committee acknowledged short-term risks, citing uncertainties in the Middle East, US, and China. It also noted that future OCR adjustments could happen at a faster or slower pace than anticipated. That's not much guidance there.

CoreLogic economist Kelvin Davidson commented that the OCR is on a steady downward trajectory, indicating the bank's intent to quickly return monetary policy to a neutral or even stimulatory setting. He predicted falling mortgage rates could temporarily boost confidence and activity in the housing market, but doubted a major increase in house prices due to job losses and slower wage growth.

Retailers are optimistic about the OCR cut. Retail New Zealand chief Carolyn Young said that the timing, just before the busy holiday season, is ideal for boosting sales, which are critical for hitting annual targets. She also hopes that the cut will restore consumer confidence.  Meurig Chapman, co- founder of Money Sweetspot, praised the Reserve Bank for not being overly conservative, noting that lower rates provide relief from the rising cost of living and high mortgage rates. He advised caution, urging Kiwis to save extra money rather than overspend during the holiday season. Finance Minister Nicola Willis called the rate cut welcome news for families and forecasted brighter days ahead.

She emphasised that lower interest rates would relieve households and businesses, boosting both investment and innovation, signalling the end of tough economic times. My thoughts on this are that interest rates and savings accounts are also reducing and so, you know, there is always a downside to good news like this, but certainly anyone who's got a mortgage that's coming off a fixed rate in the short-term is going to be pretty excited about the fact that interest rates are starting to move downward. 

If you'd like to learn more about investing in property,   📍   📍  📍 join me at one of our free events called How to Succeed with Property Investing. I'll discuss strategies for successful investing from my perspective as an experienced investor and a financial advisor. And these events are all available live, online, or in person.

Check out propertyapprentice. co. nz for upcoming dates and register today. We don't sell property, so it's all about increasing your knowledge to reduce your risk.   📍 If   📍 you've already been to one of our free events and you'd like to find out more about how we can help you to reach your financial goals, you can also book a no obligation phone call or meeting with my husband, Paul Roberts, via the website. 

That's propertyapprentice. co. nz  

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 Topic number three from interest. co. nz  On the 8th of October, New Zealand Banking Association says Despite tough economic conditions, The vast majority of New Zealanders are managing their financial situation well Despite significant increases in mortgage interest rates between 2021 and 2023, nearly 40 percent of New Zealand mortgage holders are still ahead on their loan repayments, according to the latest Retail Banking Insights report from the New Zealand Banking Association, the NZBA.

The data covers January to June 2024, just before mortgage rates started to decrease significantly. As of June, there were 1. 38 million home loans across 1. 14 million customers, with the average loan valued at $318, 151. For first time buyers, the average loan was $472, 361.  Only 1. 4 percent of mortgage holders were behind on payments, unchanged from the previous year. 

During the first half of 2024, 13, from principal and interest payments to interest only, down from 16, 167 in the latter half of 2023.  Reserve Bank data shows that non performing mortgages amounting to $2 billion, 0. 6 percent of all total mortgages, have levelled off after a sharp rise last year.

Interestingly, 39. 7 of mortgage holders are paying more than their minimum repayment, though this figure is down from 45. 8 percent two years ago.  With mortgage rates falling, it suggests that the worst may be over for many.

NZBA CEO, Roger Beaumont, acknowledged that while some people are struggling financially, The majority of New Zealanders appear to be managing well. The number of hardship applications rose slightly by 1 percent to 9, 267, with 5, 968 approved, which is a 6. 9 percent increase. Credit card data showed the average monthly spend was 2, 072, unchanged from the previous period.

Notably, 67. 2 percent of cardholders paid off their balances in full, avoiding interest charges, up by 0. 6%. Beaumont also highlighted that savers benefited from higher interest rates earlier in the year, With term deposit rates averaging 6. 1%, however term deposit rates are expected to decline along with interest rates and savings accounts following the Reserve Bank's recent OCR cuts.

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  Topic number four from Trade Me on the 8th of October. Spring trend or market rebound: house prices bounce back. Property prices saw a rebound in September following five months of decline according to Trade Me's latest property price index.

The national average asking price increased by 0. 6 percent to $823, 550, marking the first monthly rise since March. Significant increases were observed in the west coast. Which was up 3. 1%, Northland up by 2%, and Bay of Plenty up by 1. 9%. Auckland, which had fallen below 1 million in August for the first time in four years, also bounced back with the average price rising to $996, 350 from $986, 750.

Although the 0. 6 percent increase is modest, Trade Me Properties customer director Gavin Lloyd noted that it reflects renewed optimism in the housing market following a difficult winter. Lloyd also highlighted that the upcoming OCR  announcement Could influence whether this trend continues into the summer. 

11 of the 15 regions tracked by Trade Me saw price increases, while four experienced declines.

Nelson Tasman led the downturn with a 2. 3 percent drop  followed by Taranaki, which was down by 2. 2%, Gisborne, which was down by 1. 4%, and Southland, which was down by 1. 2%. In Christchurch, prices for one and two bedroom homes hit a record high of $549,050 A 3. 4 percent increase from last year. The average price for units also rose by 6.

1 percent to $471, 150. In contrast, Auckland's larger homes, five or more bedrooms, saw a 7. 2 percent year on year price rise, while Wellington's prices for similar properties dropped by 17. 5%.  Housing supply remained strong with a 23 percent year-on-year increase and a 1 percent rise from August. Gisborne percent increase in available properties, while Wellington and Otago had 44 percent and 35 percent more listings respectively. 

Though demand slightly cooled from August to September , it remains 17 percent higher than last year, with notable spikes in Gisborne, up by 35%, Auckland, up by 24%, and Hawke's Bay, up by 22%. I suspect that would be in no small part due to the recent extreme weather events which caused a significant dampening on the property markets in those areas.

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 Topic number five from interest. co. nz  on the 10th of October. Rents are static around the country, suggesting that supply and demand are reasonably balanced. Rental growth in New Zealand has been stagnant this year, according to recent bond data from Tenancy Services. The national median rent has remained unchanged at $600 a week for seven months from February to August.

The national median rent first reached $600 in December last year, briefly rising to $608 in January, before settling back at $600 in February, where it stayed. Although regional variations exist, rental properties in the main population centres stayed relatively flat in August.  In Auckland, rents fluctuated between $650  and $660 since September last year, with minor exceptions in November 2023, where it was $645,  and May 2024, where it spiked at  $670.

This suggests that Auckland's rents have been stable for almost a year, which is great news for tenants.  Wellington's median rent has ranged between $600 and $623 since March, landing at 620 in August. Similarly, Canterbury's rents have stayed between $540 and $550 a week since November 2023, sitting at  $540 a week for the second consecutive month in August.

 The ongoing stability in rent prices suggests a balanced supply and demand for rental properties nationwide, which as I mentioned before, great news for tenants, despite the fact that a lot of landlords have had increased prices with things like rates and insurance costs increasing. 

Once again, a lesson that landlords have no control over market rent.  

Brighter days are ahead as OCR rate cuts offer relief for buyers and house prices show early signs of starting to bounce back. Learn how to take advantage of this changing market. Don't miss this chance to get expert guidance and position yourself for success.   📍  📍  📍 Register for one of our events called How to Succeed with Property Investing.

In our free online and in person sessions, we teach you proven strategies so you can make smart, informed decisions in today's market. Whether you're a seasoned investor or just getting started,  this event is packed with practical tips to help you to achieve your financial goals. I'll also tell you more about how we could help you if you decided to become a client of ours.

We could help you reach your investing goals, so if you're more, if you're interested in finding out more about what we do, visit propertyapprentice. co. nz today and sign up for one of our events.     📍  📍 If you've already been to one of our free events and you'd like to know more about how we can help you on your journey, book a no obligation phone call or meeting with my husband Paul Roberts through the website propertyapprentice.

co. nz.  Thanks for listening.  

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Debbie Roberts

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Paul Roberts

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