Spring surge predicted

Reserve Bank Governor Graeme Wheeler's new LVR deposit of 40 per cent officially starts on 1 October. Picture/ Mark Mitchell

On July 19 the Reserve Bank (RBNZ) announced a fresh round of lending restrictions for home buyers.

Though the new rules don't officially kick in until October 1, the main banks applied them immediately for new loan applications, and have until the end of September to work through any outstanding pre-approvals.

There is keen interest to see what impact these restrictions will have on the market. It will take time for all sales data to filter through, but the first August sales I am seeing show little sign of prices easing.

However, there are two very useful weekly measures of market strength that we are closely watching, and they give us a clue as to how the new rules may have changed buyer behaviour across the country.

The first is the number of new listings coming on to the market, and the second is our measure of buyer inquiry through the banks.

In the week immediately following the RBNZ announcement we saw a sudden jump in new listings in almost all regions and they rose again the week after. A jump in new listings is usual for around this time of the year, but it is usually late August not mid-July.

Could this be people, especially investors, believing we have reached the top of the market and so looking to offload properties? Maybe. But it's likely an early spring surge in response to rapidly increasing prices across the country.

Then, in the latest two weeks we have seen listings drop back a little. Interesting. Usually they would be surging upwards strongly. This could be people not listing as a result of the new rules, thinking now is not a good time to sell.

Our other measure is weekly buyer demand. We measure that through the number of bank front line staff running automated valuations for their customers, often to support a lending decision. That demand surged for two weeks following the RBNZ announcement.

That makes sense.

Potential buyers will have been panicking that their planned purchase will now not be possible under the new rules and will have asked their bank about options.

But since that two-week surge, demand has dropped back in many areas, again at a time when it should be increasing strongly as we come into spring. These early signs suggest the new rules are definitely working to take some heat out of the market.

Time will tell how long it lasts.