Long stories short, my top six news items in Aotearoa’s political economy around housing, climate and poverty on Monday, March 3 are:
The first national housing market data for February show new listings falling as unsold stock levels hit their highest levels in nearly 10 years, indicating an extension of the great standoff between buyers and sellers in the engine room of the economy is depressing sales volumes and selling prices.
One reason for the lack of fresh credit-fuelled demand is rental property investor demand is sliding as they’re wary of prices falling again and many are hitting their Debt To Income (DTI) multiple limits for new borrowing.
An ongoing standoff between mostly unforced sellers who don’t want to sell for less than top dollar and buyers cautious about overpaying means house sales are stuck at less than half the levels needed to fire up growth in an economy that remains very much a housing-market-with-bits-tacked-on.
The last time the housing market fired up an economy and dragged it out of recession was in 2009/10, back before the Reserve Bank applied both Loan to Value Ratio (LVR) limits and DTI limits and back when a National Government was deliberately stimulating the economy out of recession with debt-fuelled construction and other spending, rather than trying to tighten fiscal policy.
Elsewhere, Foreign Affairs and Rail Minister Winston Peters met with Hyundai executives in South Korea on Friday to talk about building smaller ferries than the ones Hyundai started, before Finance Minister Nicola Willis cancelled them abruptly with a $500 million break fee (see Cartoon of the day below). RNZ
A PSA survey of health workers taken in January and released this morning found widespread evidence of nurses working as receptionists after ‘back office cuts.’ NZ Herald, The Post-$$$
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Housing stock on sale at 10-year high & asking prices down
Houses are just not selling and now sellers are pulling back from the market, sensing an over-supply is depressing prices. Realestate.co.nz reported this morning there were 11,363 new listings in February, up 27.6% from January, but down 3.6% from February 2024 as the usual 40% increase for the autumnal open home season failed to show.
The total stock of listings was 35,712 in February, up 10.2% from January and the highest level since 2015.
The national average asking price fell to $851,090 in February, down 4.7% from February 2024 and down 2.0% from January.
“We’re used to seeing a rush of new listings as everyone gets back from the beach and into business as usual. This year it’s less dramatic than the 40% uplift we would usually see.
“With high stock levels, sellers are having to be more willing to negotiate.” Realestate.co.nz CEO Sarah Wood said in this morning’s report.
Realestate.co.nz estimates whether a market is a ‘buyers’ market or a ‘sellers’ market by measuring the amount of time it would take to sell all the stock on the market if the long term average of sales per month from 10 years of seasonally adjusted data was applied. It found the overall market was a ‘buyers’ market, just, while Auckland and Nelson Bays were now ‘sellers’ markets.
Market frozen in standoff as unforced sellers just pulling listings later
In reality, sellers who don’t get their preferred price are more likely to pull their home off the market and wait for prices to rise, depressing sales volumes, while forced sales such as relationship breakdowns and estate sales are the ones where the ‘clearing’ market price is found. As banks don’t force mortgagee sales unless in the most extreme circumstances, this reluctance to accept a lower price leads to a standoff.
That matters because slow real estate sales depress the economy overall, given each sale represents a burst of economic activity and cash circulation as chains of sales go through, movers spend money on renovations and refitting, and some use equity cash windfalls to build new homes, buy new cars and move on with their lives.
Our housing-market-with-bits-tacked-on-economy frozen
Our-housing-market-with-bits-tacked-on-economy doesn’t fire properly unless sales per month are firing at 8,000 to 10,000 sales per month, as happened through late 2020 and 2021, rather than the 4,000 to 6,000 seen from mid 2022 to early 2025.
Sales prices remain 10-15% below their late 2021 peaks, which many sellers are choosing not to accept if they don’t have to after many weeks of quiet open homes and ‘tell-em-they’re dreamin’ offers. The listings are then quietly taken off the market. The number of unsold listings withdrawn from the market has oscillated between 1,500/month to 4,000/month over the last year, peaking in May as listings put on in January, February and March are removed for the winter, interest.co.nz calculates.
DTIs holding back landlords from new credit splurge to power rebound
Many had hoped for a surge in activity in late 2024 and early 2025 after the Reserve Bank started cutting the official cash rate aggressively, but only a modest rise in new mortgage lending has limited the activity. That’s mostly because rental property investors, who are usually the swing factors in the market, are pulling back from buying as rents and selling prices stagnate or fall, and because many are now hitting the the Debt to Income (DTI) multiple limits applied by the Reserve Bank since July last year.
Rental property investors and mortgage brokers have reported in Tony Alexander’s recent monthly surveyes they are pulling back from the market, with selling intentions at record highs, net buying intentions near record lows, and intentions to buy new homes, build new homes or develop new homes near record lows.
Mortgage brokers reported rental property investors had been more interested in borrowing in late 2024, but many had realised they were hitting their DTI limits and were pulling back from the market, Tony Alexander reported in his February survey for Mortgages.co.nz
Alexander reported comments from unnamed mortgage brokers in the survey such as:
“A lot easier with better test rates. However we are starting to see DTI upper limit of 7 being tested. It won’t be long until this is a major factor.
“More applications are getting close to or over the DTI restrictions, so DTI’s will become more prevalent in 2025.” Mortgage broker in Tony Alexander survey for Mortgages.co.nz
Chart of the day: Chicken? Or Egg?
Cartoon of the day
Timeline-cleansing nature pic of the day
Ka kite ano
Bernard
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