Quarterly Housing Sector and Housing Assistance Monitoring Report - September 2008
- The economic analysis in this report is current as at 21 November 2008 and reports on waiting list and income related rent data to the end of the September 2008 quarter.
- The current international financial crisis is due partly to financial and economic imbalances. The current problems also reflect: overly relaxed monetary policy in the United States and other countries during much of the recent period; light or inappropriate regulation of some financial institutions, instruments or markets; and excessive confidence in many countries concerning the on-going strength of the housing and other asset markets. The economy is in recession, this and the impacts of the financial crisis and associated low expectations of growth for the global economy will influence the New Zealand housing market through:
- house price falls,
- lower interest rates,
- improved affordability for first home buyers in the short to medium term,
- decreased borrowing to finance renovations and maintenance in the short term as consumers rebalance their accounts and expectations by paying down existing debt and
- decreased building and construction.
- Treasury predicts a 11.3 percent fall from the house price peak reached in November 2007 [Pre election Economic and Fiscal Update, 6 October 2008]. The Corporation is monitoring developments closely.
- Major domestic banks have tightened their credit criteria over the last year. Some banks now require 20 percent deposits for residential mortgage lending, which act as an increased barrier to new home buyers.
- Banks are less willing to lend to property developers and builders due to the weak housing and property markets and decreasing house prices. Mum and Dad investors are not as willing to invest in finance companies after a number of high profile finance company failures. This has decreased another traditional source of funding for developers. The failure of some developers and the restricted funding to others is likely to lead to a decrease in supply of new housing in the long-term.
- The tightening of credit criteria by major banks (reflecting increases in the perceived risk of lending on residential property) has contributed to an increase in uptake of the Welcome Home Loan product over the last quarter. Welcome Home Loan providers now require a smaller deposit than the standard lending conditions of the major banks.
- In response to the tougher borrowing conditions, commentators are predicting the Reserve Bank to cut the Official Cash Rate by one percentage point in December.
- Decreasing house prices and interest rates will make housing more affordable at least in the short to medium term.
- The demand for Corporation houses is likely to increase if unemployment increases as forecast.
- The total Corporation waiting list of applicants was 9,957 at 30 September 2008. Of this number, 2,504 are currently Corporation tenants applying for a transfer. Since September 2007, the total waiting list has remained steady. However, the priority waiting list (the A and B segments) has increased to 4,117, up 12.6 percent from 3,657 in September 2007.
- At the time of publication Accommodation Supplement data for the September period was not available to the Corporation, due to technical issues with the MSD-HNZC database interface. Data for the September and December quarters will be provided in the December 2008 quarter report.
