January Sees Slow Rise in Property Values, Expectations for Lower Mortgage Rates Dashed by RBNZ

Date Published: 5 February 2024

Key Facts

• The CoreLogic House Price Index showed a 0.4% monthly rise in national average property values in January 2024.
• The Minister of Commerce has announced that the Credit Contracts and Consumer Finance Act (CCCFA) will be loosened, making loan approvals a bit easier.
• Reserve Bank’s chief economist, Paul Conway, suggests that the Official Cash Rate isn’t likely to reduce anytime soon.
• Mortgage lending volumes are slowly increasing, with December’s numbers totalled $5.3 billion, up by about $0.2bn from the same month in 2022.
• LVR restrictions currently appear more binding for investors than owner-occupiers.
• The unemployment rate might rise from 3.9% to more than 4% due to more available workers rather than job losses.

Article Summary

The first month of 2024 saw a moderate increase in national average property values, according to CoreLogic House Price Index. The growth rate, at 0.4%, was smaller than that of previous months, which is likely to be a harbinger of the uneven progress expected for the rest of the year. Certain regions like Tauranga and Dunedin did perform better, while others like Hamilton and Wellington, saw less movement.

In lending related news, potential home owners could find it easier to secure loans in the coming months due to changes in the Credit Contracts and Consumer Finance Act (CCCFA). The adjustments are aimed at softening the strict focus on a borrower’s income and expenses during the loan application process, allowing for slightly more discretion. However, a drop in mortgage rates in the near future seems highly unlikely, with Reserve Bank’s chief economist, Paul Conway, signalling a hold on reductions to the Official Cash Rate given current inflation levels and economic capacity.

Despite the high interest rates, mortgage lending volumes have experienced a gradual growth. This slow pattern of growth can be cited in December’s figures, showing a $0.2bn increase from 2022, reflecting the cautious attitudes of banks and borrowers. Furthermore, the loan-to-value ratio (LVR) restrictions appear to limit investors more than owner-occupiers. These borrowers could possibly react more significantly if there is a mid-year relaxation of LVRs.

Lastly, it is anticipated that the unemployment rate may exceed 4%, driven more by high net migration than job losses. While this could potentially impact the property market, the rate still remains fairly low, suggesting a less significant effect on the housing sector.

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