Lending limits sink in

Jonno Ingerson, Research Director / Picture Supplied.

It is now 12 weeks on from the Reserve Bank's announcement of new, more restrictive lending limits.

They have definitely taken some heat out of the market. Buyer demand has cooled.

We measure that based on the number of automated valuations being run each week by bank staff as customers contact them looking for mortgages. This is a good predictor of the number of sales that will subsequently occur.

There was an initial surge in activity immediately following the RBNZ announcement.

This was likely people rushing to see if their previously approved deal was still possible, or what their options were.

Since then Auckland demand remains at the level it was at during July, typically the lowest point of the year.

Normally we would have seen an increase in activity with the start of spring, so remaining at winter low levels is a definite sign demand is weak. For the rest of the country the demand has not been hit quite as hard.

The last couple of weeks of activity are about 5 per cent higher than just before the RBNZ's announcement, but in previous years the increase over the same period has been about three times more than that.

Listings are also weak.

The number of properties being listed for sale is not what it should be for this time of year. Again that weakness appears more pronounced in Auckland than outside.

Though that may indicate a cooling of confidence from some people, for those remaining keen and able to purchase, the lack of listings in an already tight market potentially means more competition for those few properties and hence strong prices.

Speaking of which, is there in any sign yet of values cooling?

It may be too early to tell given people with pre-approved loans could still have bought up until October 1.

There will likely have been some frantic buyers trying to get in before the lid closed.

Looking at the most recent monthly sales data, values continue to rise in Auckland, but it's not universal.

Though central Auckland still appears to be rising, there are early signs of weakness in the North Shore, the west and south. Tauranga looks to have flattened and Hamilton slowed down.

If sales activity continues to weaken it is likely that values will weaken also.

Previous lending limits by the RBNZ have had a similar impact, but only for a few months.

This time it may have a longer-lasting impact due to the difficulties some investors are having with the new limits, but we're not talking negative growth any time soon.