Analysis: Lending changes, distressed sales - what's happening in the NZ housing market?

First-home buyers are holding on to their record market share of home purchases, equal to owner-occupiers wanting to move on.
First-home buyers are holding on to their record market share of home purchases, equal to owner-occupiers wanting to move on. Photo credit: Newshub.

By Kymberlee Gomes for RNZ

ANALYSIS: The odds are still stacked against property investors, as market conditions continue to favour first-home buyers. Here's what moved real estate this week.

A CoreLogic report found first-home buyers had held their record market share, equal to owner-occupiers looking to move on.

First-home buyers were particularly strong in major city markets, taking 36 percent of Wellington sales, 34 percent in Hamilton and 28 percent in Auckland and Christchurch.

Being able to tap into KiwiSaver funds, low deposit loans, and reduced competition from owner occupiers and investors was helping first-home buyers.

Investors were also being stymied by difficulties in getting bank finance, low rent yields, and - until recently - restrictive tax rules.

But as tax rules change, investors could see some gains, CoreLogic chief property economist Kelvin Davidson said.

Changes to bank lending rules, debt-to-income ratios and lower mortgage rates would influence market activity next year, he said.

Easier access to loans

The government is making changes to the Credit Contracts and Consumer Finance Act (CCCFA) hoping to make it easier for people to access a loan.

It is removing 11 pages of affordability regulations, which prescribed minimum steps to assess the affordability of a loan.

Housing Minister Chris Bishop said lenders would still be required to act responsibly.

Nearly 7 percent of people missed out on home loans in 2022 due to the regulations, he said.

These lending changes were a win for mum-and-dad borrowers, Auckland mortgage advisor Bruce Patten from Loan Market said.

While still "tricky", the new legislation changes would also help first-home buyers, he said.

Measures like loan-to-value and debt-to-income ratios would slow down interest rates from rising.

"People were able to borrow way too much when rates were 2.5 percent."

Commerce and consumer affairs minister Andrew Bayly said the existing regulations created unnecessary compliance costs, put arduous delays on processing loans, and were failing to protect vulnerable people they were supposed to safeguard.

Responsibility for the CCCFA will move from the Commerce Commission to the Financial Markets Authority.

Distressed sales amid job losses, high interest rates

Meanwhile, the rising numbers of job losses in the public and private sectors and continued repricing to higher interest rates may lead to increasing distressed property sales, Davidson said.

There had been few mortgagee sales since interest rates started rising sharply, but rising unemployment combined with more borrowers facing higher rates were a factor to watch.

Households had largely coped with higher interest rates because they had had jobs, Davidson said.

The fall in job advertisements is continuing but at a slower pace.

A Seek report found declines in education and training, healthcare and medical, and government sectors, although the biggest drop was in media, which fell 16 percent.

More than 3100 public sector jobs are set to be cut.

More than 300 media jobs are also set to go at Newshub and TVNZ, with smaller job losses at private companies.

However, there was double digit growth in human resources, recruitment, consulting and strategy, and legal sectors, but it would be tough for those losing jobs in the public sector to readily step into another.

Construction costs

The price of building materials is expected to continue to drop over the next two-to-three years following an easing of import restrictions.

While some industries are concerned it will lead to a drop in standards, others dismiss those concerns.

The changes would drive down prices, Combined Building Supplies Cooperative chairperson Carl Taylor said.

The government changes to legislation were positive for consumers and builders, despite the concerns raised by industry groups about standards, he said

But the Window & Glass Association warned of issues in understanding overseas standards for building products and the trustworthiness of overseas test reports.

Extension to earthquake strengthening rules

Owners of earthquake-prone buildings are being given four more years to complete strengthening work.

The current rules put in place in 2017 require buildings to be remediated before set dates.

Nearly 500 deadlines were set to expire over the next four years.

The government is bringing forward a review into the regulations scheduled for 2027, to this year.

RNZ podcast The Detail this week looked at how rules that looked sensible in the wake of the two massive shakes in Christchurch and Kaikōura, turned toxic when councils and building owners found out how much it would cost to meet the new laws.

RMA changes

Farming, mining and other industrial regulations are being scrapped or amended under the government's first changes to the Resource Management Act.

The changes include revision of stock exclusion, winter grazing, Te Mana o te Wai, mining consenting, and suspension of Significant Natural Area requirements.

The government expected the changes to be passed by the end of the year.

It was aiming to "reduce the regulatory burden on resource consent applicants and support development in key sectors," RMA Reform Minister Chris Bishop said.

The changes would give certainty to councils and consent applicants, he said.