QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC

 
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
Quarterly Property Market
& Economic Update
New Zealand
Quarter 4, 2020
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
Table of Contents
    About CoreLogic.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
    Executive Summary.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
    Macro Economic and Demographic Indicators.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
             New Zealand Asset Classes .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 6
             New Zealand and Australia GDP Growth. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 7
             New Zealand Population.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
             Migration .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
             Regional Building Consents .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
             Consumer Confidence.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
             Employment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11
            Interest Rates .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 12
    Housing Overview .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
            Early Property Market Indicators .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
            Listings.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
            Lending Conditions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16
            Sales Volumes.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18
             Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
             Rent.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 20
            House Price Index .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
            Buyer Classification .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
    Main Cities Housing Market Indicators. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 25
             Auckland Market Activity. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26
             Auckland Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 27
            Current Auckland Suburb Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 28
             Hamilton Market Activity. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
             Hamilton Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 31
             Tauranga Market Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
            Tauranga Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 33
            Wellington Market Activity .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 34
             Wellington Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 35
            Christchurch Market Activity.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 36
             Christchurch Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
            Dunedin Market Activity.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 38
             Dunedin Values. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
    CoreLogic Data and Analytics .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
             Legal Disclaimer .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
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QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
About CoreLogic

CoreLogic is a leading property information, analytics and               Contact
services provider in the United States, Australia and New Zealand.
                                                                         Call us 0800 355 355
CoreLogic helps clients identify and manage growth opportunities,
improve performance and mitigate risk, by providing clients with         Wellington office
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and analytics.                                                           PO Box 4072
                                                                         Wellington 6140
Whilst all reasonable effort is made to ensure the information in this
publication is current, CoreLogic does not warrant the accuracy,         Auckland office
currency or completeness of the data and commentary contained in         Level 5
this publication and to the full extent not prohibited by law excludes   41 Shortland Street
all loss or damage arising in connection with the data and               Auckland 1010
commentary contained in this publication.                                Email: reports@corelogic.co.nz

                                                                         corelogic.co.nz                  3
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
Executive Summary
    The upturn for the property market that started in Q3         Classification series shows that the key buyer groups
    last year gathered considerable momentum in Q4,               of interest are still first home buyers (23% of
    with buyer demand (especially from investors),                purchases in Q4) and mortgaged investors, who
    mortgage lending activity, property sales volumes,            surged up to a 27% market share in the final three
    and property values all showing strength in the final         months of 2020. Given that FHBs don’t have anything
    three months of 2020. However, the (un-)affordability         to list/sell before they buy and that very few investors
    problem has come to the fore again, and both the              are selling much at present either, their continued
    Government and Reserve Bank have the property                 buying presence will keep the pressure on the supply/
    market firmly in their sights.                                demand balance in the market.

    A key support for the recent strength in the property         Looking at movers, their share of purchases dipped to
    market has been the decent performance of the                 just 26% in Q4, an historically low level. In some cases,
    economy, especially with unemployment not rising as           existing owner-occupiers are choosing to stay where
    far as had been anticipated. Indeed, from its current         they are due to already high debt levels and the extra
    level of 5.3% (up from the recent low of 4.0%), the           costs of moving house (such as legal, estate agent etc).
    unemployment rate may only rise by another 1% or              But in other cases, people aren’t moving because they
    so. Meanwhile, timely indicators such as the NZ               simply can’t find the ideal next property, given the
    Activity Index show that the wider economy continues          tight supply of available listings. In turn, that is feeding
    to recover, and sectors such as construction are still        back into an even tighter listings picture.
    growing steadily (despite previous fears of a collapse).
                                                                  With the property politics having heated up and
    In the property market itself, mortgage credit has            affordability pressures re-emerging, it looks likely that
    continued to flow in the past few months. Indeed,             regulation will be a key feature of the market in 2021.
    after the slump in activity in April and May, new             We’ve already seen the Reserve Bank move to
    lending flows quickly recovered. Indeed, the rise in          reinstate the LVR speed limits from 1st March, and
    activity over the second half of 2020 was so strong           there is surely a growing chance that a 40% deposit
    that it far outweighed the lockdown-related hiatus,           requirement for investors could be officially mandated
    and left the value of mortgage lending by the banks           later in the year (ANZ has already done so). Indeed,
    up by almost 10% for the calendar year.                       the last time that mortgaged investors had a market
                                                                  share as high as they do now – which was back in Q3
    Consistent with that, property sales volumes also             2016 – was also when the RBNZ previously imposed a
    picked up strongly in the final few months of 2020 and        40% deposit requirement. Meanwhile, an extension to
    in fact could have been even higher still were it not for     the current five-year hold period for the Brightline
    the lack of listings on the market – you can’t buy            Test could be on the cards too, while the Reserve
    what’s not for sale. Combined with low mortgage               Bank has also requested the ability to use debt to
    rates, that lack of choice for buyers has been a key          income ratio caps if and when they deem it necessary.
    contributor to the sharp growth in property values
    lately.                                                       So overall, there are many moving parts and a COVID
                                                                  relapse could of course change everything. But for
    Indeed, the CoreLogic House Price index showed that           now, it would seem that property sales volumes will
    average property values across NZ as whole rose by            be solid again in 2021, and that property values will
    6.1% in Q4 – a figure not seen since 6.6% in the three        continue to rise. However, after an 11% gain in values
    months to February 2004. Tauranga (10.2%),                    in 2020, growth in 2021 could be a little slower, as
    Wellington (8.1%), and Dunedin (6.4%) were all above          those potential regulatory changes in the property
    that national average, with smaller areas such as             market start to take effect.
    Masterton and Whanganui also recording strong
    growth. Hamilton (4.1%) and Christchurch (3.4%) were          As always, we keep a running monitor on the property
    slightly more subdued in Q4, but those growth figures         market every week via our NZ Property Market Pulse
    were still fairly solid, especially for Christchurch (which   articles, so be sure to check these out on our website
    has seen little change at all in property values for a        http://www.corelogic.co.nz/news-research/
    number of years now).                                         all-news/. Our podcast is also a great source of data
                                                                  and commentary: https://
    What’s more, it may be that listings remain fairly low        corelogicnzpropertymarket.buzzsprout.com/.
4   for a while yet. After all, the CoreLogic Buyer                                                                       4
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
Macro Economic and
Demographic Indicators

                         5
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
New Zealand Asset Classes

                          RESIDENTIAL REAL ESTATE

                          $1.35 trillion
                          $298 billion in home loans

                          COMMERCIAL/INDUSTRIAL REAL ESTATE

                          $229 billion
                          NZ LISTED STOCKS

                          $197 billion
                          NZ SUPER & KIWISAVER

                          $126 billion

    The value of residential property across the country as at Q4 2020 was $1.35T. Mortgages are secured against
    22% of this value, or in other words, 78% of the value of the property market is household equity. However,
    it’s also important to note that household debt is high relative to income, and to some extent the debt has
    only been sustainable in recent years because of low mortgage rates.

    Ever since lockdown the NZX has been on a reasonably steady upwards trend, and indeed after reaching a
    trough of less than 8,500 in late March, it has since rebounded to sit at around 13,400 in early January (a rise
    of more than 55%). The rise in the sharemarket has been replicated for pooled investment funds, with the
    values of KiwiSaver pots and the NZ Super Fund also continuing to improve.

6   Sources: CoreLogic NZ, Reserve Bank of NZ, NZX, NZ Super Fund                                                 6
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
New Zealand and Australia GDP growth
After dropping by 11% during                Annual Average GDP Growth (%)
April-June (obviously with a
large COVID effect from                     8
lockdown and subsequent
social restrictions), NZ’s GDP              7

surged back by 14% over                     6
July-September. The net
result is that the economy is               5
estimated to actually be a bit
                                            4
bigger now than it was a year
ago, even though we haven’t                 3
had any international tourists
                                            2
for the past 6-9 months.
Clearly, this is an impressive              1
result, although it does reflect
the influence of social                     0
support packages such as the
                                           -1
wage subsidy, which have
now ended.                                 -2

Even so, the timelier                      -3
indications from the NZ                      1990            1994      1998      2002     2006   2010          2014   2018

Activity Index show that
activity continued to expand                          Australia         NZ
in October and November, so
that bodes well for the official
Q4 GDP release (18th March).                Annual Change in New Zealand Activity Index and GDP (%)
Over the coming months and
quarters, economic data has                 10%
the potential to remain a little
‘jumpy’, although the overall                   5%
prospects for GDP growth
look brighter this year,
especially if the COVID                         0%

vaccine can be rolled out
successfully and we can                         -5%
regain some of the lost
international tourism.
                                           -10%

                                           -15%

                                           -20%

                                           -25%
                                               2004                    2008             2012            2016             2020

                                                      GDP           NZ Activity Index

Source: Reserve Bank of New Zealand, Stats NZ                                                                                   7
QUARTERLY PROPERTY MARKET & ECONOMIC UPDATE - NEW ZEALAND QUARTER 4, 2020 - CORELOGIC
New Zealand Population and Migration
    Quarterly Change in National                                             Population Change Composition
    Population (persons per quarter)                                         (persons per quarter)
                                                                             40000
    50000

                                                                             35000
    45000

                                                                             30000
    40000

                                                                             25000
    35000

    30000                                                                    20000

    25000                                                                    15000

    20000                                                                    10000

    15000                                                                     5000

    10000                                                                        0

     5000                                                                     -5000

       0                                                                     -10000
            1992   1996   2000     2004   2008   2012   2016   2020                   1996   2000    2004   2008   2012   2016   2020

              4 quarter moving average                                                 Natural increase
              Quarterly population change                                              Net migration

     Annual Change in Population (persons)
              105000

                                 37000

                                                 4200                 5100                                  7000
                                                                                             3100                         1800

    There’s been a dramatic slowdown in the rate of population growth in the past two quarters, from an annual
    pace of 2.4% in Q1 to 1.9% in Q3. Natural growth (i.e. births minus deaths) has of course been pretty steady,
    so the overall slowdown reflects the migration component – which is no surprise, given the closed border.
    Indeed, after averaging about 18,500 per quarter throughout 2019, the net migration figure was just 900
    people in Q2 2020 and 1,600 in Q3. These are the weakest migration figures for 6-7 years.

    Both arrivals and departures of migrants have fallen in recent months, with the (low) arrivals mostly made up
    of returning NZ citizens, and the departures mostly being non-citizens. Although the so-called ‘flood’ of
    returning kiwis post-COVID has probably been exaggerated a bit, it’s still true that the net balance for kiwi
    migration is much stronger than it was in the 2000s and early 2010s, when the so-called brain drain was in full
    swing. Indeed, in 2011-12, we lost more than 40,000 NZ citizens in net terms, whereas over the past 12
    months we’ve gained more than 20,000.

8   Source: Statistics New Zealand
Long term migration (12-month rolling totals)

250,000                                                            Net
                                                                   Arrivals
                                                                   Departures
200,000

150,000

100,000

  50,000

       0

 -50,000
        2002                 2006   2010     2014           2018

Migration flows for NZ citizens (12-month rolling totals)

 80,000                                                            Departures
                                                                   Arrivals
                                                                   Net
 60,000

 40,000

 20,000

       0

-20,000

-40,000

-60,000
       2002                  2006   2010     2014           2018

Source: Statistics New Zealand                                                  9
Building Consents
     New dwelling consents trend (consents per month)
     1,800                                                                                         Auckland region
                                                                                                   Waikato region
     1,600
                                                                                                   Wellington region
                                                                                                   Canterbury region
     1,400
                                                                                                   Rest of NI
                                                                                                   Rest of SI
     1,200

     1,000

       800

       600

       400

       200

         0
          1995          1999          2003   2007        2011        2015        2019

     Residential construction activity continues to hold up better than many would have thought, with the
     shortage of available property on the market probably pushing some buyers towards a self-build or off-the-
     plans purchase. Indeed, the number of new dwelling consents was more than 38,000 in the 12 months to
     November 2020, higher than the pre-COVID peak back in February, and again the strongest levels since the
     mid-1970s.

     Much of the strength in nationwide construction activity reflects the growing role for smaller dwellings such
     as townhouses, while regionally the key market remains Auckland. This all seems pretty logical, as we face the
     need to accommodate an ever-growing population in a more intensified dwelling stock. Of course, at the same
     time, consents issued for alterations to existing properties are also running at high levels, with more people
     choosing to renovate rather than relocate. This is also a useful trend in terms of improving the quality of
     housing.

     However, although dwelling consents are running at high levels in their own right, they’re not quite as
     impressive when you look relative to our population. Indeed, we’ve recently been consenting about 7.5 new
     dwellings per year for every 1,000 people in the country, which is the highest for about 15 years, but still well
     below the figures of 13 in 1973 and 12 in 1974. In other words, we need to keep dwelling consents going at
     current levels for a number of years yet, or perhaps even raise them further.

     Unfortunately though there are already signs emerging of cost pressures in the construction industry,
     reflecting rising land prices and also labour shortages. This could restrain our ability to keep dwelling
     consents high over a series of years. In addition, restrictions on development finance are always a lingering
     risk.

     Overall, the high number of dwellings already consented suggests that builders will be busy well into 2021.
     The hope thereafter is that consents will stay high and help to alleviate the supply pressures that we face, and
     in turn help to improve housing affordability. Encouragingly, the Government has indicated that they will
     continue with a strong state house construction programme.

10   Source: Statistics New Zealand
Consumer Confidence
ANZ-Roy Morgan Consumer Confidence (index, monthly)
160

140

120

             Average
100

 80

 60

 40

 20

  0
      2004     2006        2008   2010      2012      2014      2016      2018      2020

The recent trend for the ANZ Roy Morgan consumer confidence measure has been positive, with the index rising from
100 in September to 112 in December – the highest reading since February. December’s figure was still below the long
term average of around 119, but even so the recent rises have still been encouraging.

In other words, confidence amongst households has rebounded from the worst point of alert level four lockdown, and
although there were fears that the end of the wage subsidy may reverse the stronger trend, confidence has proved to
be pretty resilient in the past few months. No doubt low mortgage rates and steadily rising house prices are playing a
role in supporting consumer confidence, while the smaller-than-expected rise in unemployment (so far) is also likely to
have been a factor.

Meanwhile, a similar message applies for business confidence – it has been rising in recent months and suggests that
the economy should start off fairly well in 2021.

Sources: ANZ, Roy Morgan                                                                                                  11
Employment
     Annual change in employment,                                        Labour force
     full time and part time                                             participation rate (%)
     10%                                                                 72

      8%
                                                                         70

      6%
                                                                         68
      4%

                                                                         66
      2%

      0%                                                                 64

     -2%
                                                                         62
     -4%

                                                      Full time          60
     -6%
                                                     Part time
     -8%                                                                 58
           1987           1998              2009                  2020        1987               1999               2011

                                                                         Number of Jobseeker
     Unemployment rate (%)                                               Support claimants
     12

                                                                         240,000
     10

                                                                         220,000
     8
                                                                         200,000

     6                                                                   180,000

                                                                         160,000
     4

                                                                         140,000

     2
                                                                         120,000

     0                                                                   100,000
          1986            1998                2010                             Jan-20   Mar-20    May-20   Jul-20    Sep-20   Nov-20

     The latest labour market figures were clearly weaker than the recent past, with overall employment growth
     slowing to 0.4% year on year in Q3, the lowest since 0.2% in Q1 2013. Part-time employment growth
     accelerated to 3.4% in Q3, but this probably isn’t as encouraging as it looks – given that it may reflect a shift of
     workers from full-time jobs into a reduced hours situation. Indeed, the full-time employment figure actually
     dropped by 0.3% in Q3 2020, the first fall since 2012.

     Meanwhile, after a drop in Q2 from 70.7% to 69.9%, the labour force participation rate (people employed or
     looking for work as a percentage of the working age population) rose back slightly in Q3 to 70.1%. This
     explains part of the sharp rise in the unemployment rate in Q3, from 4.0% to 5.3%, but the most significant
     factor there was simply people losing their jobs – especially in tourism related sectors of the economy.

     Looking ahead, the unemployment rate is unfortunately expected to rise further in the coming months.
     However, the end of the wage subsidy doesn’t appear to have triggered the sharp job cuts that some were
     fearing, and unemployment rate projections are being slowly improved. Indeed, whereas a few months ago
     the Reserve Bank was predicting a peak unemployment rate of more than 9%, that forecast has now been
     reduced to around 6.5%.

     All else equal, higher unemployment will tend to be a restraint for the housing market, although to the extent
     that it’s younger/lower-paid workers who feel more of the brunt, it may be the tenant/rental sector that gets
     more affected than owner-occupation.

12   Source: Stats NZ, Ministry of Social Development
Interest Rates
The outlook for interest rates looks a little more mixed             Mortgage Interest Rates (%)
than it done for a while now. On one hand, the Reserve               25
Bank’s (RBNZ) asset purchase programme is still in action,                                                               2 year fixed rate
and their cap remains at $100bn of purchases out to June                                                  Floating mortgage interest rates
                                                                     20
2022. Meanwhile, the Funding for Lending Programme is
also underway, which means banks can access cheap loans
directly from the RBNZ, which in turn allows them to                 15

continue lending to business and households at low
interest rates. In short, these measures point to further
                                                                     10
low rates for borrowers.

On the other hand, however, the bounce-back in the                    5

economy in Q3 (and the continued strength of other
economic indicators for October through to December) as
                                                                      0
well as the resilience of the property market suggest that             1965          1971   1977   1983      1989   1995     2001     2007     2013   2019

the chances of a negative official cash rate have receded –
which in turn would indicate that mortgage rates might
have already reached a floor.                                        Official Cash Rate and Mortgage Rates (%)
                                                                     12
Overall, a typical new mortgage (with a 20% deposit) on a                                                                           OCR history
                                                                                                                                OCR projection
one year fixed term currently carries a rate of around 2.5%,
                                                                     10                                                    2-yr fixed mortgage
and while further falls in interest rates couldn’t be ruled
out (especially if the banks enter a new ‘rate war’), previous
                                                                      8
expectations that they could fall below 2% are now looking
less likely. Of course, significant rises in interest rates aren’t
                                                                      6
especially likely for the next year or two either.

                                                                      4

                                                                      2

                                                                      0
                                                                          2000                              2009                             2018

                                                                     Average Two Year Fixed Mortgage Rates (%)
                                                                      5 .2%

                                                                      4 .7%

                                                                      4 .2%

                                                                      3 .7%

                                                                      3 .2%
                                                                              2018                        2019                      2020

Source: Reserve Bank of NZ, interest.co.nz                                                                                                              13
Housing Overview

14
Early Property Market Indicators
During alert level four lockdown, measures relating to the early stages of a sale process – i.e. pre-listing (such as appraisals
generated by real estate agents) and pre-mortgage (valuations ordered by banks) – fell away sharply, which was no surprise.
However, as our Early Market Indicators Report shows, they then bounced back steadily, and have recently been running at
around normal levels: https://www.corelogic.co.nz/early-market-indicators

In other words, the early stages of both the supply (appraisals, which lead to listings) and demand (borrowers requesting a
mortgage, hence the bank ordering a valuation) pipelines are holding up well, which points to further resilience for property
sales volumes in the coming months. If anything, demand has been running ahead of supply, which suggests continued
upwards pressure on property values too.

Listings
Weekly flow of new for-sale listings                                Weekly flow of new for-rent listings
3,500
                                                  2020              4,000
                                                                                                                         2020
                                                  2019              3,500
                                                                                                                         2019
3,000

                                                                    3,000
2,500

                                                                    2,500
2,000

                                                                    2,000
1,500
                                                                    1,500

1,000
                                                                    1,000

 500
                                                                     500

   0                                                                   0
   Jan-20    Feb-20   Apr-20   Jun-20   Aug-20    Oct-20   Dec-20      Jan-20   Feb-20    Apr-20   Jun-20    Aug-20   Oct-20    Dec-20

A key and ongoing feature of the NZ property market in recent times has been the low supply of listings available on the
market, which has been bolstering property values as buyers continue to face limited choice. There has been no material
change in the tight listings situation in the past three months either, with the total stock of existing properties available for
sale running at multi-year lows.

In turn, that has reflected both a continued stream of achieved sales (which removes listings at the end of pipeline) but also
only a ‘normal’ flow of new listings coming onto the market at the start of the pipeline. Indeed, after the listings lull of April/
May, it was possible that we’d subsequently see new listings running above previous levels – but this hasn’t happened.

In some ways, there is a vicious circle going on for listings, with some existing owner-occupiers not moving house because
they don’t have much choice about their next property. And of course, those owners are then not listing their own house,
which feeds back into even tighter supply conditions. Similarly, other active buyer groups at present – namely first home
buyers (FHBs) and mortgaged investors – aren’t generally selling any property before they purchase either (certainly FHBs
are not selling anything, by definition).

A similar message applies for new rental listings. In recent weeks, they’ve only been running at ‘normal’ levels, despite the
lack of activity in April/May.

Source: CoreLogic                                                                                                                15
Lending conditions
     Annual Change in Gross New Lending Flows ($m per month)

       3,000

       2,000

       1,000

            0

      -1,000

      -2,000

      -3,000
                2016                2017               2018                2019                 2020

          Investor             Owner-occupier

     In the past three months, mortgage lending activity has continued to surge higher and the new flows hit
     $9.3bn in November, having topped $7bn in each of September and October. In each case, this equated to an
     annual increase of at least $1.7bn. Indeed, after April’s lockdown disrupted the market, the bounce-back has
     been so strong that total lending flows for 2020 so far have returned to being much higher than for 2019.

     First home buyers have been active borrowers this year, but perhaps the most important driver has been
     demand from mortgaged investors. The reduction in term deposit rates has diverted some of their money
     into the property market, while of course low mortgage rates have been a factor as well. But on top of that,
     the temporary removal of the loan to value ratio rules (LVRs) has been another important driver – many
     investors who may previously have struggled to raise the 30% deposit have been able to purchase property
     with a 20% deposit instead.

     That said, this doesn’t mean that general credit standards have dropped. In fact, banks are still scrutinising a
     borrower’s income and expenses very closely, and also applying their serviceability tests at (hypothetical)
     interest rates of more than 6%. Generally speaking, all borrowers are still requiring at least a 20% deposit too.

     However, the surge in activity amongst higher LVR investors has prompted the age-old debate about what’s
     ‘good’ for the property market, and the RBNZ of course is consulting on the reinstatement of the previous LVR
     regime – i.e. 20% deposit for owner occupiers with a 20% allowance outside the threshold (speed limit), and a
     30% deposit requirement for investors with a 5% speed limit. This looks likely to become the official
     requirement again from 1st March, while of course the ANZ bank has gone even further, requiring investors to
     put in 40%.

16   Sources: Reserve Bank of New Zealand
With all this in mind, then, it’s      High LVR Lending to Owners and Investors (% of new lending)
likely that securing a mortgage
may be a little tougher this year      25%
than it was for most of the
second half of 2020. In turn,
this could take a little heat out      20%
of sales activity and property
prices as we move through the
next few months – especially if
                                       15%
the Government also gives the
RBNZ the ability to impose debt
to income ratios (DTIs) on
lending at some stage.                 10%

Finally, it needs to be noted that
the mortgage payment deferral          5%
scheme will end on 31st March.
However, about 90% of these
deferrals have already ended
                                       0%
without too much trouble, so it
                                         2014           2015        2016         2017        2018   2019          2020
seems unlikely that the passing
of the late March deadline will
have too much impact on the
general lending environment or         Refinancing Profile for Mortgages (% of stock)
the wider property market.
                                        50%
                                                                                 44.57%
                                        45%

                                        40%

                                        35%

                                        30%

                                        25%

                                        20%                                             18.09%         17.71%

                                        15%
                                                    10.48%
                                        10%
                                                                                                                  5.62%
                                        5%                     3.52%

                                        0%
                                                         Floating                 Fixed < 1 year           Fixed > 1 year

                                             Investor           Owner-occupier

Sources: Reserve Bank of New Zealand                                                                                        17
Sales Volumes
     The first few months of strengthening property            Nationwide Sales Volumes
     sales activity post-lockdown could be mostly              (monthly total)
     explained by ‘catch up’ demand after the pause
     during April/May, but that’s no longer the case – we      14,000
     now have genuine new and extra demand in the              13,000
                                                               12,000
     market. Indeed, the monthly sales total (across           11,000
     private and agent sales) for October topped 10,000,       10,000
                                                                9,000
     then climbed even higher to 11,112 in November, and
                                                                8,000
     stayed above 10,000 in December too.                       7,000
                                                                6,000
     The rebound in activity has been seen in almost all        5,000
                                                                4,000
     parts of the country – and it’s worth noting that          3,000
     sales activity may have been even higher still, were it    2,000
     not for the low supply of property listed and actually     1,000

     available to buy. Indeed, areas that perhaps haven’t               1996 1999 2002 2005 2008 2011 2014 2017 2020
     seen such a strong rebound in sales are more likely
     to have restrained by lack of supply rather than
     sluggish demand.                                          Nationwide Annual Change
     The rise in demand has reflected continued interest       in Sales Volumes (%)
     from first home buyers, who in many cases are
     tapping their KiwiSaver funds for the deposit (or at      40%
     least part of it), but also mortgaged investors – in
                                                               20%
     particular, those who were previously struggling to
     find the 30% deposit, but thanks to the temporary           0%

     removal of the LVR speed limits have recently been        -20%
     able to purchase with 20%.
                                                               -40%
     Looking ahead, the environment is favourable for
                                                               -60%
     more solid levels of property market activity in the
     coming months, especially given continued low             -80%
     mortgage rates and the fact that unemployment                      1996 1999 2002 2005 2008 2011 2014 2017 2020
     isn’t expected to peak as high as was previously
     thought. We’d anticipate sales activity in 2021 being
     around the 90,000 mark, similar to the past few
     years, and in line with long term averages (albeit
                                                               Regional Sales Volumes
     below past peaks in 2015-16 and the mid-2000s).           (year-on-year % change)

                                                               55%
                                                               50%
                                                               45%
                                                               40%
                                                               35%
                                                               30%
                                                               25%
                                                               20%
                                                               15%
                                                               10%
                                                                5%
                                                                      30.5% 54.4% 36.5% 32.4%     7.4%   32.4% 10.8%
                                                                       NZ    AUK   HAM   TAU      WEL     CHC   DUN

18   Source: CoreLogic
Values
Reflecting the tight supply/        Average Value of Housing Stock - New Zealand ($)
demand balance and low
mortgage rates, property
                                                                                                                 $788,967
                                    $800,000
values have well and truly
spiked higher in the past few
                                    $700,000
months. In addition, the upturn
has been broad-based across
the country, including              $600,000
previously more subdued areas
such as Christchurch and            $500,000
Selwyn.

In December, national average       $400,000
property values rose by 2.6%,
taking the three month change       $300,000
to 6.1%, and the annual growth                                                                   $788,967
rate to 11.1%. That equates to a
                                    $200,000
value of $788,967, up by almost
$79,000 from a year ago. This is
obviously a drastically different   $100,000
level for house prices than
would have prevailed if those                $0
pessimistic forecasts during                         2005        2008          2011        2014           2017    2020
lockdown of a 15-20% fall in
prices had become reality.          Annual and Quarterly Change in Value (%)
In addition, the momentum           20.0%                Quarterly Change              $45,289    6.1%
looks to be upwards for at least                         Annual Change                 $78,838    11.1%
the first few months of 2021                             5 Year Change                $229,919     41%
too. The end of the mortgage        15.0%
deferral scheme on 31st March
shouldn’t be too much of an
                                    10.0%
issue, but the reinstatement of
LVRs on 1st March (especially if
investors were to eventually
                                     5.0%
require a 40% deposit) and
ever-increasing affordability
pressures could start to bite        0.0%
thereafter and mean a slower
end to 2021 for property
values.                              -5.0%                                  Quarterly Change         $45,289        6.1%
                                                                            Annual Change		          $78,828		      11.1%
                                                                                           Annual Change %
                                                                            5 Year Change		          $229,919
                                                                                           Quarterly Change %       41%
                                    -10.0%

                                                  2005        2008           2011        2014             2017    2020

                                        Quarterly Change %           Annual Change %

                                                                                                                         19
House Price Index
     The upswing in property values has been seen               Average Dwelling Value ($)
     right across the country, and although the
     ‘provincial’ markets are still seeing the largest          $1,200,000
                                                                                    New Zealand
     gains, the main centres have accelerated too.                                  Auckland
                                                                                    Hamilton
                                                                $1,000,000          Tauranga
                                                                                    Wellington
     Areas such as Gisborne (30.4%), Masterton                                      Christchurch
                                                                                    Dunedin

     (29.6%), and Rangitikei (27.6%) have all seen               $800,000

     average property values rise by more than 25%
                                                                 $600,000
     over the past 12 months. But larger areas such as
     Palmerston North and New Plymouth have also                 $400,000
     seen pretty strong gains in values, at 20.3% and
     11.8% respectively.                                         $200,000

     In Auckland, average values have risen 6.0% over             $0
                                                                         2008   2011     2014   2017       2020
     the past three months (to December), and by 9.1%
     over the past year. Manukau and Waitakere have
     seen the fastest upturns within Auckland, while the more expensive North Shore and Auckland City (old
     territorial authority) markets have lagged behind slightly.

     Tauranga’s average values have surged by 10.2% in the past three months and by 14.8% over the past year, to
     now stand at $876,122. Hamilton has seen an increase of close to 12% since December last year, while
     Dunedin’s average values are up by 13.1%, and the wider Wellington area (City, Porirua, Upper Hutt, Lower
     Hutt) by 15.4%.

     Meanwhile, even the previously lagging markets around Canterbury have shown signs of life. Selwyn and
     Christchurch have both seen average values rise by about 3.5% in the past three months (and by roughly 6%
     over the past 12 months), while Waimakariri’s figures have been 5.4% and 8.5% respectively.

                                                          December 2020
                               Current value        1 month            3 months                    12 months   5 years
     New Zealand                  $788,967               2.6%                6.1%                    11.1%      41%

     Auckland                    $1,142,700              2.4%                6.0%                    9.1%       23%

     Hamilton                     $674,562               2.3%                4.1%                    11.7%      52%

     Tauranga                     $876,122               6.8%                10.2%                   14.8%      62%

     Wellington                   $861,794               3.2%                8.1%                    15.4%      81%

     Christchurch                 $539,561               1.6%                3.4%                    6.2%       12%

     Dunedin                      $582,269               1.9%                6.4%                    13.1%      88%

20
Annual Value Change (%)

 -4%                                        36%

 © 2021 Mapbox © OpenStreetMap

Over a 12 month horizon, average property values have risen in almost all parts of the country, with the most
strength evident in the central and lower North Island. Queenstown’s values have ‘only’ been flat over the
past 12 months, but this is actually a pretty good result, given the sharp falls seen in the first few months
after lockdown.
                                                                                                                21
Three Month Value Change (%)

     -1%                                9%

      © 2021 Mapbox © OpenStreetMap

     Over the shorter three-month period since September, the acceleration in the property market is clear
     to see pretty much right across the country – including almost all of the North Island, and large parts of
     Canterbury and Otago. Parts of Southland, by contrast, have looked a little softer.

22
Rent
National Annual Change                                            Gross Rental Yield – National (%)
in Value and Rent (%)
20%                              Annual change in rent
                                                                  4 .5%
                                Annual change in value
15%                                                               4 .0%

                                                                  3 .5%
10%

                                                                  3 .0%

 5%
                                                                  2 .5%

 0%                                                               2 .0%

                                                                  1 .5%
-5%

                                                                  1 .0%

-10%
                                                                  0 .5%

-15%                                                              0 .0%
    2005     2008       2011      2014        2017      2020              2005         2008     2011   2014        2017     2020

National rents averaged $480 in the three months to December, up by 8.0% from the same period a year earlier. Rental
growth has accelerated quite strongly since it dipped to about 3% in July/August, and there are certainly few signs of much
rental weakness, which might have been anticipated given the unemployment problems being experienced by younger
workers at present (who are more likely to be renting than in owner-occupation).

Auckland’s rents in the three months to November averaged $566 per week, up by 6.8% from a year earlier, while
Wellington’s market has been a little softer lately, with rents ‘only’ up by 4.7% annually. By contrast, Dunedin has seen
average rents rise by 10.5% over the past year, Tauranga by 10.6%, and Hamilton and Christchurch both at 8-9%.

Meanwhile, outside the main centres, areas such as Gisborne, Whanganui, and Invercargill have all seen average weekly
rents rise by about 15% or more over the past year. It’s only really Queenstown that continues to see much downwards
rental pressure, with a drop of almost 17% over the past year.

Rental yields around the main centres range from 2.6% in Auckland up to 3.8% in Christchurch. With term deposit rates
falling (and borrowing getting cheaper too), the rising presence of investors in the market shows that those property yields
are starting to look increasingly attractive.

                                         Med Weekly Rent                         Ann chg rent                 Gross yield

Auckland                                      $566                                  6.8%                         2.6%

Hamilton                                      $433                                  7.5%                         3.3%

Tauranga                                      $523                                  10.6%                        3.1%

Wellington                                    $566                                  4.7%                         3.0%

Christchurch                                  $399                                  9.4%                         3.8%

Dunedin                                       $393                                  10.5%                        3.5%
                                                                                                                                   23
Buyer Classification
     Buyer Classification –                                               NZ Property Transfers by Non-Citizens
     New Zealand (% of sales)                                             or no Resident Visa (% of total transfers)
                                                                          3 .5%
                                                                          Mover
     30%   30%                                                            First Home Buyer
                                                                    27%   Multiple Property Owner Mortgage
                                                                          3 .0%
                                                                          Multiple Property Owner Cash
     30% 30%                                                        26%   New to Market
           26%
                                                                          ReEntry
                                                               26%        Other
           26%                                                   23%      2 .5%
           21%                                                 25%
     20% 21%                                                   25%
                                                                          2 .0%
     20%

                                                                          1 .5%
                                                                    12%

     10%   10%                                                 12%        1 .0%
     10% 10%

           5%
            5%
           4%
                                                                5%5%
                                                                 5%
                                                                          0 .5%
            4%                                                  5%
           4%
            4%                                                  2%1%
      0%
      0%                                                                  0 .0%
           2005
           2005      2008
                    2008       2011
                              2011       2014
                                        2014      2017
                                                 2017        2020
                                                           2020                   2017                2018             2019   2020

      Mover                 Multiple property owner mortgage                      Buying                     Selling
      First home buyer      Multiple property owner cash
      New to market         ReEntry       Other

     The past few months have seen a continuation of recent buyer trends, with first home buyers (FHBs)
     managing to sustain a market share in the mid-20%’s, while mortgaged investors have continued to rise, with
     movers (i.e. existing owner-occupiers) tending to be relatively quiet.

     The key trend in recent months has really been the continued growth in market share for mortgaged
     investors. Indeed, after troughing at just 22% in Q4 2017, their share of purchases has steadily risen and in Q3
     2020 was 26%. It has pushed even higher in Q4, reaching 27% – that is the highest figure seen since 28% in Q3
     2016, which was just prior to the Reserve Bank (RBNZ) imposing the 40% deposit requirement on investors
     nationwide.

     The low interest rate environment is having a two-way effect on investors – it’s cheap to borrow, so they’re
     actively seeking property because of that. But at the same time, low rates on term deposits are also creating
     an incentive to take money out of the bank and look for alternative asset choices, such as property. Indeed,
     the stock of money held in bank term deposits has actually fallen in recent months. Meanwhile, investor
     demand for property has also been stimulated by the temporary removal of the LVR speed limits, which has
     allowed more buyers to get in with a 20% deposit rather than the previous 30%.

     Of course, the Reserve Bank has consulted on reinstating a 30% deposit for investors, which looks likely to
     commence from 1st March. Meanwhile, ANZ for example has already gone further, requiring a 40% deposit
     from investors. These restrictions are likely to take some heat out of investor demand, but not remove it
     altogether – there’ll still be buyers who can find the required 30-40% deposit.

     Meanwhile, the share of property purchases in Q4 made by FHBs was 23%, down from Q3’s figure of 25%, but
     still a very strong share by historical standards. FHBs are still using their KiwiSaver funds for the deposit (or at
     least part of it), while a compromise on location and/or property type is also helping them into the market.

     Looking at movers, their share of purchases dipped to just 26% in Q4, an historically low level (indeed the
     lowest since Q4 2010). In some cases, existing owner occupiers aren’t moving because they simply can’t find
     the ideal next property, given the tight supply of available listings. In turn, that is feeding back into an even
     tighter listings picture – i.e. it’s a vicious circle.

24   Source: Statistics New Zealand
Main Cities Housing
Market Indicators

                      25
Auckland Market Activity
     Buyer Classification – Auckland                                                    Buyer Classification – Northland
     (% of purchases)                                                                   region (% of purchases)
                                                                                       40%
                                                                                   Mover                                                                                      First Home Buyer
                                                                                                                                                                              Multiple Property
     30%                                                                           Multiple Property Owner Mortgage
                                                                                                                                                                              Multiple Property
                                                                                   Multiple Property34%
                                                                                                     Owner Cash
                                                                                                                                                                              New to Market
     30%                                                                     30%   First Home Buyer                                                                  32%
                                                                                                                                                                              Mover
            28%
             28%                                                             29%   New to Market32%
                                                                                          30%                                                                                 ReEntry
             27%
            27%                                                              28%   Other
                                                                                         30%
                                                                                   ReEntry
                                                                                                                                                                              Other
             27%                                                             26%
            27%                                                             23%                                                                                        27%
     20%
      20%                                                                    20%                  22%                                                                  21%
                                                                                        20%
                                                                                               21%                                                                    21%
                                                                                       20%                                                                             20%
                                                                                               19%                                                                   18%
                                                                                                 15%
                                                                                                                                                                       15%
                                                                            12%                  15%                                                                 15%
     10%
      10%                                                                    11%               12%
                                                                                       10%
                                                                                        10%
             7%
              7%                                                                                 8%                                                                    7%
                                                                             6%
                                                                            5%                     7%                                                                 7%
                                                                                                                                                                     7%
             4%
              4%                                                              5%
                                                                             4%                  4%                                                                  5%
                                                                                                  4%
      0%                                                                     1%
                                                                            1%                   4%
                                                                                                  4%                                                                   2%
                                                                                                                                                                     2%
     0%            2005          2008        2011      2014      2017     2020           0%
                                                                                          0%
            2005          2008           2011       2014      2017      2020                      2004
                                                                                               2003         2006
                                                                                                            2006      20082009 2010    2012
                                                                                                                                      2012    2014
                                                                                                                                                2015 2016     2018
                                                                                                                                                            2018     2020
                                                                                                                                                                       2021

      Mover                             Multiple property owner mortgage                     Mover                          Multiple property owner mortgage
      First home buyer                  Multiple property owner cash                         First home buyer               Multiple property owner cash
      New to market                     ReEntry       Other                                  New to market                  ReEntry       Other

     The national Buyer Classification trends over recent months have also been seen in Auckland, but perhaps to
     an even stronger extent.

     Indeed, the share of purchases going to mortgaged investors has spiked up to 30% in Q4, up from 26% back
     in the middle of 2020 and also above the national share (27%). Gross rental yields are relatively low in
     Auckland, so it’s possible that some of these investors have found what they perceive to be ‘bargains’,
     potentially timing the market right at the start of another upswing phase.

     The rise in market share for mortgaged investors has come alongside a continued low presence for movers,
     with their share at just 23% in Q4 2020, roughly the lowest levels since 2009. Again, in some cases this is likely
     to reflect the shortage of listings and their inability to find the ideal next property.

     Meanwhile, the market share for first home buyers in Auckland has dipped in the past few months, now
     standing at 26%, down from 29% in Q3. Given the renewed upswing in property values (from an already high
     level of >$1m) in our biggest city, this could be the first signs of ‘fatigue’ from FHBs.

     Around Auckland’s neighbouring areas, the mix of buyers is quite different in Northland, with movers
     accounting for the highest share of activity, at 30% in Q4 2020. First home buyers have a much lower
     presence in this market, at just 16% in Q4, while mortgaged investors have also been quieter, at 19%.

26
Auckland Values
Average value of housing stock                                    Annual and quarterly value change
Auckland ($)                                                      Auckland (%)
                                                $1,142,700
$1,200,000                                                                                            $64,374    6.0%
                                                                  25.0%      Quarterly Change
$1,100,000                                                                   Annual Change            $95,590    9.1%
                                                                             5 Year Change           $210,000     23%
$1,000,000                                                        20.0%

 $900,000
                                                                  15.0%
 $800,000

 $700,000                                                         10.0%

 $600,000
                                                                   5.0%
 $500,000

 $400,000
                                      $1,142,700                   0.0%

 $300,000
                                                                   -5.0%
 $200,000                                                                                                          Annual Change %
                                                                  -10.0%                                           Quarterly Change %
 $100,000
       $0                                                                    2005            2008   2011         2014        2017         2020
             2005   2008    2011       2014      2017   2020

                                                                           Quarterly Change %                   Annual Change %

The upturn in average property values for Auckland as a whole in the past few months has reflected rising markets across
each sub-area. Indeed, over the past three months, the changes in average values have ranged from around 4% to 6%
everywhere, with Franklin at the bottom of the range (4.1%) and the Auckland and Manukau City areas equal top (6.3%).

On an annual basis, the wider Auckland market has seen average values rise by 9.1%, to now stand at $1,142,700. In the
sub-markets, those annual growth rates have ranged from 7.8% in Papakura and Auckland City (old council area), up to
11.5% in Manukau.

In broad terms, first home buyers and mortgaged investors tend to be more active in cheaper areas, while movers are
more important in more expensive areas (where a higher amount of equity is required). This pattern for buyer types – with
FHBs and investors generally busy at present; but movers quieter – would help to explain continued rapid value gains in
cheaper parts of Auckland, but a (slightly) more subdued picture elsewhere.

                                                                     DECEMBER 2020
                             Current value              1 month             3 month                 12 months                   5 years
Rodney                         $1,040,323                 2.1%                5.6%                    10.2%                         28%

North Shore                        $1,311,259             2.7%                6.1%                     9.1%                         20%

Waitakere                          $912,136              2.2%                 5.6%                    11.1%                         22%

Auckland City                      $1,342,162            2.3%                 6.3%                    7.8%                          22%

Manukau                        $1,005,432                2.8%                 6.3%                    11.5%                         26%

Papakura                           $771,697               1.3%                4.3%                    7.8%                          28%

Franklin                           $740,042               1.9%                4.1%                    9.3%                          28%

                                                                                                                                                 27
Current Suburb Values:
     ‘Mapping the Market’
     Auckland suburb value change 2020 ($)

     Generally speaking, property values around the country have bounced back strongly since lockdown, and
     even Queenstown (where there were initially sharp falls) now seems to be past the worst too. CoreLogic’s
     interactive ‘Mapping the Market’ product shows the changes over the past 12 months (covering a pre- and
     post-COVID phase), it’s freely available and updated quarterly. The heatmaps in ‘Mapping the Market’ are
     point-in-time snapshots of median values from 2019 and 2020, and show the % and $ change over that period
     too. See www.corelogic.co.nz/mapping-market

     Auckland is illustrated in the heatmap here. Herne Bay remains the highest priced suburb in Auckland (and
     the entire country), with a median property value of $2.68m. Auckland Central has the lowest median value
     (reflecting its concentration of apartments), at about $548,000. Only three suburbs have a median value
29
Hamilton Market Activity
      Buyer Classification – Hamilton                                                  Buyer Classification – Waikato region
      (% of purchases)                                                                 (% of purchases)
                                                                                     40%                                                                                     First Home Buye
     40%                                                                          Mover                                                                                      Multiple Property
       40%                                                                        First Home Buyer                                                                           Multiple Property
                                                                        37%       Multiple Property Owner Cash                                                               New to Market
                                                                                  Multiple Property Owner Mortgage                                                   32%     Mover
                                                                        35%               Market 31%
                                                                                  New to30%                                                                        32%       ReEntry
                                                                                  ReEntry                                                                                    Other
     30%    31%                                                                   Other
                                                                                       30% 31%
       30%31%                                                               28%                 25%
            27%
          27%                                                           26%
                                                                                                                                                                     24%
            25%
          25%                                                                                25%
                                                                                       20%
                                                                                                                                                                   22%
     20%                                                                             20%
       20%                                                               20%                                                                                       19%
                                                                        19%                  17%
                                                                                              17%                                                                    18%

                                                                                             14%
                                                                                              14%                                                                    15%
                                                                                                                                                                   14%
                                                                        12%
     10%
       10%                                                                           10%
                                                                                       10%
             7%7%                                                                              6%
                                                                        8%
                                                                        4%                     4%
                                                                                                6%                                                                 5%5%
             4%4%                                                                                                                                                  5%5%
             3%3%                                                       3%
                                                                         4%                    3%
                                                                                                4%
                                                                         2%
                                                                        1%                       3%                                                                2%
     0%0%                                                                1%            0%
                                                                                        0%
                                                                                                                                                                     2%
             2004 2006
                    2006 2008
                           2008 2010
                                  2010 2012
                                         2012 2014
                                                2014 2016
                                                       2016 2018
                                                              2018 2020
                                                                     2020                        2004      2006      200820092010   2012    2014 2015
                                                                                                                                                   2016   2018   2020 2021
                                                                                             2003          2006                      2012                   2018

        Mover                   Multiple property owner mortgage                           Mover                          Multiple property owner mortgage
        First home buyer        Multiple property owner cash                               First home buyer               Multiple property owner cash
        New to market           ReEntry       Other                                        New to market                  ReEntry       Other

      Hamilton’s Buyer Classification trends have also mirrored the national picture lately, but with the upswing in
      market share for mortgaged investors even more pronounced.

      Indeed, in the fourth quarter of 2020, mortgaged investors accounted for 37% of property purchases in
      Hamilton, well above the national figure of 27% (which itself was pretty high). Again, low term deposit rates are
      likely to be diverting funds towards property in Hamilton, alongside cheap mortgage rates that are
      encouraging borrowing.

      Meanwhile, first home buyers had a 28% share of purchases in Hamilton in Q4 2020, more or less the highest
      on record. Cheaper property than in surrounding main centres (such as Auckland and Tauranga) could be
      attracting some FHBs into the Hamilton market. Finally, the share in Hamilton going to movers remains low, at
      just 20% in the fourth quarter of 2020.

      Around the wider Waikato region (excluding Hamilton), buyer classification patterns in Q4 saw movers’ share
      hold relatively steady (at about 32%), and FHBs also hold their ground at around 18%. However, mortgaged
      investors’ market share continued to rise, reaching 24% in Q4.

30
Hamilton Values
Average value of housing stock                                 Annual and quarterly value change
Hamilton ($)                                                   Hamilton (%)

$700,000                                     $674,562                             Quarterly Change            $26,785   4.1%
                                                               30.0%              Annual Change               $70,528   11.7%
                                                                                  5 Year Change              $230,351    52%
$600,000
                                                               25.0%

                                                               20.0%
$500,000

                                                               15.0%
$400,000
                                                               10.0%

$300,000                                                        5.0%

$200,000
                                       $674,562                 0.0%

                                                                -5.0%
                                                                                                                   Annual Change %
$100,000                                                                                                           Quarterly Change %
                                                               -10.0%

     $0                                                                    2005        2008           2011       2014           2017         2020

           2005    2008    2011      2014    2017   2020
                                                                        Quarterly Change %                   Annual Change %

Hamilton’s average property values have also been strong in the past few months, up by 2.3% in December alone and by
4.1% since September. The level is now just short of $675,000.

The growth in December was pretty broad-based across Hamilton, ranging from about 2% in Central & North West and
South East, up to almost 3% in North East. On a three-month change, Central & North West has lagged a little, but North
East (6.2%) and South West (5.6%) have risen sharply. Across the board for Hamilton’s sub-areas, annual changes in average
property values are now in the double-digits.

                                                                  DECEMBER 2020
                             Current value          1 month              3 month                     12 months                    5 years

Hamilton Central &
                                  $617,999           1.8%                  1.5%                        10.4%                           48%
North West

Hamilton North East               $835,599           2.8%                  6.2%                        11.7%                           49%

Hamilton South East               $622,686           1.8%                  3.6%                        11.2%                           53%

Hamilton South West               $613,105           2.4%                  5.6%                        13.8%                           56%

                                                                                                                                                    31
Tauranga Market Activity
      Buyer Classification – Tauranga                                                      Buyer Classification – Bay of Plenty
      (% of purchases)                                                                     region (% of purchases)
     40%                                                                                  40%
      40%
                                                                                        40%                                                                                First Home Buye
                                                                                    First Home Buyer                                                                       Multiple Property
                                                                                    Multiple Property Owner Mortgage                                                       Multiple Property
                                                                                    Multiple Property Owner Cash
                                                                                                                                                                           New to Market
                                                                                    Mover
                                                                                    New to Market                                                                          Mover
            33%
             33%                                                             31%    ReEntry                                                                                ReEntry
     30%                                                                                                                                                           30%     Other
                                                                                  31% 30% 30%
                                                                                    Other 30%
                                                                                           30%
      30%
                                                                                                                                                                   28%
                                                                            27%                        27%                                                        27%
                                                                                                   27%
                                                                                  25%                                                                             25%
            23%
             23%
                                                                                                                                                                  22%
     20%                                                                                20%
      20%
                                                                                  19% 20%
            16%                                                                                    18%
                                                                                                    18%
              16%                                                                                                                                              17%
            15%                                                              16%                                                                                 13%
                                                                                                                                                                  14%
              15%                                                                 15%              13%
                                                                                                    13%
                                                                             13%
     10%
      10%                                                                               10%
                                                                                          10%
             6%
              6%
             4%                                                              5%   5%                  6%
                                                                                                       6%                                                         6%
                                                                                                                                                                   5%
             3%
              4%                                                             5%   4%                  4%
                                                                                                       4%                                                         5%
                                                                                                                                                                   5%
               3%                                                                 2%                  3%
                                                                                                       3%                                                         1%
     0%0%                                                                    2%            0%
                                                                                                                                                                   2%
                                                                                          0%
            2004    2006
                     2006   2008
                             2008   2010
                                     2010   2012
                                             2012   2014
                                                     2014   2016
                                                            2016   2018
                                                                   2018   2020
                                                                          2020                     2003                2006   2009     2012    2015     2018        2021
                                                                                                  2003                 2006   2009    2012    2015    2018        2021

           Mover                    Multiple property owner mortgage                          Mover                            Multiple property owner mortgage
           First home buyer         Multiple property owner cash                              First home buyer                 Multiple property owner cash
           New to market            ReEntry       Other                                       New to market                    ReEntry       Other

      From October to December, movers remained the key buyer group in Tauranga, accounting for 31% of
      purchases. The high market share for movers contrasts with all of the other main centres, and potentially
      illustrates how a solid base of equity/wealth (which movers have, either from having lived locally or bringing in
      equity from other parts of the country) is important in Tauranga, rather than necessarily local wages being a
      key driver for a property purchase.

      Meanwhile, first home buyers’ market share dipped in Tauranga in Q4, from 19% in Q3 to 16% - still broadly in
      line with past norms. By contrast, mortgaged investors’ market share continued to creep higher, from 24% in
      Q3 2020 to 27%. That was the highest share for investors in Tauranga since Q1 2018, and is a consistent trend
      with many other parts of the country. Around the wider Bay of Plenty region (excluding Tauranga), mortgaged
      investors are also seeing a solid market share at present, with movers a little quieter than normal.

32
Tauranga Values
Average value of housing stock                                Annual and quarterly value change
Tauranga ($)                                                  Tauranga (%)
$900,000
                                            $876,122
                                                               30.0%              Quarterly Change           $80,940   10.2%
                                                                                  Annual Change             $112,700   14.8%
$800,000
                                                               25.0%              5 Year Change             $334,241    62%

$700,000
                                                               20.0%

$600,000
                                                               15.0%

$500,000
                                                               10.0%

$400,000
                                                                5.0%

$300,000                             $876,122                   0.0%

$200,000
                                                                -5.0%

$100,000                                                                                                          Annual Change %
                                                               -10.0%                                             Quarterly Change %
     $0
           2005    2008    2011    2014    2017    2020                    2005        2008          2011       2014           2017    2020

                                                                        Quarterly Change %                  Annual Change %

Tauranga’s average property values have soared in the past few months, rising 10.2% from September to December.
They’re also up by 14.8% over the past 12 months, which equates to almost $113,000. The level of values in Tauranga now
stands at more than $876,000. In surrounding areas such as Rotorua and Whakatane, the picture is a little mixed.
Whakatane’s values have been flat since September, and up by ‘only’ 6.4% in the past 12 months. However, in Rotorua,
momentum is much stronger, with the three-month gain at 8.8% and annual gain at 19.2%.

                                                                                                                                          33
Wellington Market Activity
      Buyer Classification – Wellington                                                 Buyer Classification – Lower Hutt
      (% of purchases)                                                                  region (% of purchases)
     40%                                                                           First Home Buyer
                                                                                       40%
                                                                                   Mover
                                                                                   Multiple Property Owner Cash
                                                                                                                                                                           First Home Buye
      30%                                                               30%        Multiple Property Owner Mortgage
                                                                                         40%                                                                               Multiple Propert
                                                                        29%        New to  Market
              27%                                                                                                                                                          Multiple Propert
                                                                                   ReEntry
              27%                                                                                                                                                          New to Market
            33%                                                                    Other                                                                             33%   ReEntry
     30%
                                                                              31% 30% 30%
                                                                                        30%                                                                          32%   Mover
                                                                                                                                                                           Other
                                                                                        30%      30%
                                                                                                                                                                   27%
                                                                                               27%
      20%                                                               21%
                                                                              25%                                                                                  25%
            23%                                                                                   25%
                                                                                                                                                                   22%
     20%
                                                                              19% 20%
                                                                                   20%
            16%                                                                                18%
            15%                                                                                                                                                    17%
                                                                                                                                                                   14%
       10%                                                              9%    15%              13%
     10%       8%                                                                      10%
                                                                                      10%
             6%
              4%
             4%
                                                                        5%
                                                                        4%    5%                 6%
                                                                                                 5%                                                                6%
                                                                                                                                                                     7%
                                                                                                                                                                    5%
              3%
             3%                                                               4%                 4%
                                                                                                 4%
                                                                                                                                                                    4%
                                                                                                                                                                   5%
                                                                                                                                                                    2%
                                                                                                 3%
                                                                        2%    2%         0%      3%
     0%0%                                                                                      2004                   2008          2012            2016
                                                                                                                                                                   1%
                                                                                                                                                                  2020
                2005      2008                                                         0%
                  2006   2008    201020112012   2014
                                                 2014     2017 2018 2020
                                                        2016          2020
                                                                                              2003           2006            2009   2012     2015          2018    2021

           Mover                 Multiple property owner mortgage                         Mover                               Multiple property owner mortgage
           First home buyer      Multiple property owner cash                             First home buyer                    Multiple property owner cash
           New to market         ReEntry       Other                                      New to market                       ReEntry       Other

      Across the four main territorial authorities in Wellington (City, Lower Hutt, Upper Hutt, Porirua), first home
      buyers remained the largest buyer group in Q4, accounting for 30% of property purchases. That was down a
      touch from the figure of 31% in Q3, but still a very high level. Porirua remains a hotspot for first home buyers,
      where they accounted for 32% of property purchases in Q4, with Lower Hutt seeing a figure of 33%.

      Tucked just in behind first home buyers were mortgaged investors, with their rising market share a similar
      trend to many other parts of the country. Lower Hutt has seen a surge of investor activity lately, with their
      share rising from 22% in the second quarter of 2020 to 32% in Q4. Wellington City also has a relatively high
      presence for mortgaged investors, at 29% (on a par with first home buyers).

      Meanwhile, existing owner occupiers are very quiet around Wellington at present, accounting for just 21% of
      purchases in Q4, basically a record low for the 15 year history of this series. As with other parts of the country,
      the tight supply of available listings is meaning that many would-be movers are instead just staying where
      they are, and potentially renovating (rather than run the risk of selling and not being able to find their ideal
      next home).

      Elsewhere around the Wellington region, mortgaged investors have also been a rising presence on the Kapiti
      Coast in particular, with their share of property purchases rising from less than 20% a couple of years ago to
      27% in the final quarter of 2020.

34
Wellington Values
Average value of housing stock                                    Annual and quarterly value change
Wellington ($)                                                    Wellington (%)

$900,000                                      $861,794
                                                                                     Quarterly Change            $64,598   8.1%
$800,000
                                                                                     Annual Change              $114,839   15.4%
                                                                  20.0%              5 Year Change              $385,173    81%
$700,000
                                                                  15.0%
$600,000
                                                                  10.0%
$500,000
                                                                   5.0%
$400,000
                                                                   0.0%
$300,000
                                       $861,794
                                                                   -5.0%
$200,000                                                                                                              Annual Change %
                                                                                                                      Quarterly Change %
                                                                  -10.0%
$100,000                                                                      2005        2008           2011       2014           2017         2020

     $0
           2005    2008     2011     2014     2017   2020                  Quarterly Change %                   Annual Change %

The wider Wellington property market has been part of the boom in the past few months, with growth in average values
since September ranging from 7-8% in Upper Hutt, Carterton, Lower Hutt, Wellington City, and Kapiti Coast, up to a
rampant 14.2% in South Wairarapa and 17.4% in Masterton.

On an annual basis, growth has been at least 20% in Masterton, South Wairarapa, and Porirua, but also in double digits in
every other area of the region too. Wellington City has the highest level for property values, with the higher starting point
potentially contributing to slightly lower growth (but still strong at 13.4% annually).

                                                                     DECEMBER 2020
                              Current value          1 month                3 month                     12 months                     5 years

Porirua                            $788,104            4.6%                  10.9%                        20.8%                           98%

Upper Hutt                         $707,138            2.3%                   6.9%                        17.2%                           104%

Lower Hutt                         $750,542            3.8%                   7.7%                        17.2%                           93%

Wellington City                    $970,669            2.8%                   7.9%                        13.4%                           70%

Carterton                          $533,796            3.2%                   7.4%                        18.0%                           101%

Masterton                          $519,437            6.8%                  17.4%                        29.6%                           113%

South Wairarapa                    $694,312            4.3%                  14.2%                        26.7%                           119%

Kapiti Coast                       $746,081            4.7%                   8.4%                        18.3%                           91%

                                                                                                                                                       35
Christchurch Market Activity
      Buyer Classification – Christchurch                                                 Buyer Classification – Canterbury
      (% of purchases)                                                                    region (% of purchases)
     40%40%                                                                        First Home Buyer
                                                                                   New40%to Market                                                                 First Home Buye
                                                                                   Multiple Property Owner Cash                                                    Multiple Property
                                                                                   Multiple Property Owner Mortgage                                                Multiple Property
                                                                                                                                                                   New to Market
              33%                                                                  Mover 40%
                                                                                                                                                                   Mover
            33%                                                                    ReEntry                                                                 37%     ReEntry
     30%30%                                                                        Other
                                                                             28% 31% 30% 30%
                                                                                                                                                                   Other
                                                                                                   35%
                                                                             27%                                                                          27%
              24%                                                                          30%  27%
                                                                                   25%                                                                    25%
            23%
              23%
                                                                             22%
                                                                                                                                                          22%
     20%20%
                                                                                   19% 20%         22%                                                     22%
            16%                                                                            20%   18%                                                       19%
            15%                                                                                                                                           14%
                                                                            13%    15%           13%
                                                                                                  16%
     10%                                                                                           13%
       10%                                                                               10%
              6%
               8%                                                                          10%                                                             10%
              4%                                                                   5%             6%                                                      6%
               4%
              3%
                                                                            5%     4%              6%
                                                                                                  4%
                                                                                                   5%
                                                                                                                                                           5%
                                                                                                                                                          5%
                                                                            5%                                                                             5%
               4%                                                                  2%             3%                                                      1%
      0% 0%                                                                  1%                    3%                                                      1%
                                                                                          0%
                                                                                           0%
                2005
                    2006   2008
                            2008
                                   20102011 2012   2014
                                                   2014
                                                          2016
                                                            2017
                                                                   2018 20202020                 2003      2006        2009    2012    2015     2018        2021
                                                                                                 2003      2006       2009    2012    2015    2018        2021

           Mover                   Multiple property owner mortgage                         Mover                      Multiple property owner mortgage
           First home buyer        Multiple property owner cash                             First home buyer           Multiple property owner cash
           New to market           ReEntry       Other                                      New to market              ReEntry       Other

      Christchurch is seeing very similar Buyer Classification trends to the other main centres, with first home
      buyers and mortgaged investors active (and rising), but movers quiet.

      Indeed, the market share for FHBs was pretty steady at 28% in Q4 2020, in line with past highs. Meanwhile,
      the share of purchases going to mortgaged investors continued to rise in Q4, and now stands at 27% – up
      from 21% a couple of years ago and the highest figure since Q3 2016. Movers’ market share in Christchurch
      was just 22% in Q4, a low only matched once before (in Q4 2013).

      Around the wider Canterbury region, movers play a bigger role than in Christchurch itself, such as in
      Ashburton where movers were 34% of activity in 2020 (albeit down from 38% in 2019). In Waimakariri, movers’
      share was even higher last year, at 44% (up from 41% in 2019), while Selwyn’s figure was 40% (up from 35% in
      2019). To some degree, the high share for movers in Selwyn will reflect existing owners (either from Selwyn or
      other parts of Canterbury) seeking out a new-build.

36
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