As we head solidly into the new year we are seeing a lot of hot activity from buyers, new data from the Reserve bank has indicated that mortgage lending is up, and the results in the market – such as high sales rates in the last three months (especially in December a typically quieter month) has indicated that this trend is not going away. Sales reports for January backs this up with Barfoot & Thompson reporting their best sales numbers in four years for the month of January, sold 678 residential properties in January, up 3.8% on January 2019 and up 14.3% on January 2018.
But as the sales increase, and there’s a larger demand, what are the immediate consequences on the market?
First, we have to look at who is actually buying, especially as lending has increased a noticeable amount since low mortgage rates have come into effect. According to data released from the Reserve Bank, mortgage lending soared to new heights for the month of December, with the amount borrowed up nearly $1.2 billion compared with the same month a year earlier.
The Reserve Bank’s latest residential mortgage lending by borrower type figures revealed that the total amount advanced in mortgages last month was $6.536 billion, up from just $5.371 billion in December 2018. The data revealed that First Time Borrowers are continuing to take advantage of low mortgage rates, with the group borrowing just over $1.2 billion. Investors are also slowly making a comeback, which will please the Reserve Bank, borrowing just under $1.3 billion in December, continuing their slow rise back into the market.
But as the market becomes more stable and more successful, house prices will inevitably rise. This alreast starting to slowly happen, with recent QV figures show average residential property values increased by 2.5% in the three months to January, and in Auckland where the market has previously been subdued for some time, average values rose by 1.7% over the three months to January to $1,049,383.
The main group that will be affected by rising house prices will always be the first home buyers who could potentially get priced out of the market once again. With the reserve bank putting in a lot of effort to get this group back into investing in the market, it will be interesting to see what moves they make in the coming months.
There has also been a noticeably tight number of listings recently, which is another factor in high house prices, but this seems to be slowly changing with a significant increase in the number of residential properties coming on to the market in January, suggesting a reasonably buoyant summer selling season ahead.