Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...

Page created by Dave Curtis
 
CONTINUE READING
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
Quarterly Property Market
& Economic Update
New Zealand
Quarter 3, 2020
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
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 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13
            Lending Conditions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
            Sales Volumes.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
            Listings.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16
            Nationwide Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18
             House Price Index .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
             Rent.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 22
             Buyer Classification .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
    Main Cities Housing Market Indicators. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
            Auckland Market Activity. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26
             Auckland Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 27
            Auckland Suburb Value Change .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 28
             Current Auckland Suburb Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
             Hamilton Market Activity. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 32
            Hamilton Values .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 33
            Tauranga Market Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
             Tauranga Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 35
            Wellington Market Activity .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 36
             Wellington Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
            Christchurch Market Activity.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 38
             Christchurch Values.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
            Dunedin Market Activity.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
             Dunedin Values. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
    CoreLogic Data and Analytics .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 42
2            Legal Disclaimer .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 43
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
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
innovative, technology-based services and access to rich data            Level 2, 275 Cuba Street
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 3, 2020 - New Zealand ...
Executive Summary
    The last time we produced this report three months          cases, existing owner-occupiers are choosing to stay
    ago, uncertainty about how the property market              where they are due to already high debt levels and
    would emerge from lockdown was still high. Indeed,          the extra costs of moving house (such as legal,
    sales volumes were looking a little fragile, and values     estate agent etc). But in other cases, people aren’t
    themselves had also dropped slightly in certain             moving because they simply can’t find the ideal next
    areas. However, roll forward three months, and it’s         property, given the tight supply of available listings.
    been striking how quickly the situation has turned          In turn, that is feeding back into an even tighter
    more positive.                                              listings picture.

    In fact, sales volumes in September were nothing            In terms of property values, most of the country has
    but exceptional. The estimated total for both agent         seen resilience in the past few months, and in many
    and private sales of 9,666 was the single strongest         cases further increases (even the previous falls in
    month for more than four years, and it ranks sixth in       Queenstown seem to be abating). The national
    the list of most active months dating back to May           average property value rose by 0.8% in September
    2007. To be fair, given that year to date volumes are       (to $743,678) and is 2.1% higher than six months ago.
    essentially at parity with the same stage in 2019,          The main centres are broadly following that pattern,
    there is probably still some ‘catch up’ growth taking       albeit there are hints that Dunedin’s previously very
    place after the lull of April/May. Even so, considering     strong momentum may have slowed a little in the
    the current economic environment, they’re still             past few months.
    some impressive sales figures.
                                                                In the coming months, there are clearly some risks
    Moreover, sales volumes may have been higher still,         to be aware of for the property market. Most
    if not for the shortage of listings actually available on   importantly, the wage subsidy is now wearing off and
    the market. With mortgage credit still accessible,          unemployment could start to rise more significantly.
    and interest rates low, the strength of buyer               This may affect younger and lower-paid people the
    demand is not giving that listings situation any time       most, so could flow through more significantly to the
    to resolve itself, and this is feeding through into         rental side of the property market rather than
    higher prices. The General Election has also                owner-occupied.
    obviously been and gone, with no material effect on
    the market.                                                 Even so, that risk doesn’t seem enough to knock the
                                                                property market off course in the short term. After
    The third quarter of the year saw a continued strong        all, the Reserve Bank is doing everything it can to
    presence for first home buyers (FHBs) and                   help protect jobs now, and is willing to accept rising
    mortgaged multiple property owners (MPOs, or                asset prices (e.g. houses) as a result of their
    investors) in the market, but existing owner-               continued support measures, such as a Funding for
    occupiers (movers) continued to sit on the sidelines        Lending Programme and further drops in interest
    in many cases. For investors, the ability to enter with     rates.
    a 20% deposit now, rather than the previous 30%,
    has been a factor – alongside the low returns               Earlier in the year, property sales volumes looked
    available on other assets, such as bank deposits.           like they might be as low as 65,000 for 2020 as a
    Their share of purchases in Q3 was 26%, the highest         whole, but now they look on track to be about
    since 28% in Q3 2016.                                       85,000 – a similar figure to last year. Meanwhile,
                                                                property values also seem set to continue to rise
    Meanwhile, FHBs are making use of KiwiSaver for             into 2021. Overall, it’s been a remarkable turnaround
    their deposits (or at least part of it), while would-be     in the past three months.
    OE’ers who are now instead purchasing a property
    are also helping to boost overall FHB demand. In            As always, we keep a running monitor on the
    fact, the share of property purchases in Q3 made by         property market every week via our NZ Property
    FHBs was 25%, up from 23% in Q2, and the highest            Market Pulse articles, so be sure to check these out
    figure in the history of our Buyer Classification series    on our website http://www.corelogic.co.nz/
    (topping the previous peak of 24% in 2006-07).              news-research/all-news/. Our podcast is also a
                                                                great source of data and commentary: https://
    Looking at movers, their share of purchases dipped          corelogicnzpropertymarket.buzzsprout.com/.
4   to just 25% in Q3, an historically low level. In some                                                           4
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
Macro Economic and
Demographic Indicators

                         5
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
New Zealand Asset Classes

                          RESIDENTIAL REAL ESTATE

                          $1.25 trillion
                          $289 billion in home loans

                          COMMERCIAL/INDUSTRIAL REAL ESTATE

                          $227 billion
                          NZ LISTED STOCKS

                          $180 billion
                          NZ SUPER & KIWISAVER

                          $118 billion

    The value of residential property across the country has rebounded from a slight dip in Q2, and sat at $1.25
    trillion in Q3. Mortgages are secured against 23% of this value, or in other words, 77% 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.

    After a volatile period during March and April, a steady upwards trend has re-emerged for the value of shares
    and pooled investment funds. The NZX50 has recently gone back above the 12,000 mark (surpassing pre-
    COVID peaks), while the values of KiwiSaver pots and the NZ Super Fund have also rebounded strongly.

6   Sources: CoreLogic NZ, Reserve Bank of NZ, NZX, NZ Super Fund                                              6
Quarterly Property Market & Economic Update - New Zealand Quarter 3, 2020 - New Zealand ...
New Zealand and Australia GDP growth
New Zealand’s GDP dropped                   Annual Average GDP Growth (%)
by a record 12% from Q1 to
Q2, but of course this was                  8
pretty much expected, given
                                            7
the alert level four lockdown
and severe restrictions on                  6
economic activity in April.
That followed a drop in GDP                 5

in Q1 as well, so it meant that
                                            4
NZ was in technical recession
in the first half of the year.              3
Sectors such as transport,
                                            2
construction, and hospitality
were the hardest hit by the                 1
lockdown.
                                            0
However, most economic
activity indicators have                   -1
bounced back strongly since
                                           -2
Q2 (albeit some of the
momentum was stifled by the                -3
move back up the alert levels                1990          1994     1998       2002     2006   2010          2014   2018
in August) and it’s inevitable
that the GDP figures for the                         Australia        NZ
third quarter will be much
improved. That said, it will be
a while yet until the size of               Annual Change in New Zealand Activity Index and GDP (%)
the economy returns to
where it was pre-COVID,                    10%
given that we’ve lost
international tourism for now.                  5%

Indeed, for the calendar year
2020, the economy may                           0%
shrink by 5-6% in total, only
rebounding by 2-3% in 2021
                                            -5%
– albeit that recovery would
be faster were the borders to
re-open sooner than                        -10%
expected.

                                           -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 3, 2020 - New Zealand ...
New Zealand Population
    Quarterly Change in National                                                Population Change Composition
    Population (persons per quarter)                                            (persons per quarter)
                                                                                    40000
    45000
                                                                                    35000

    40000
                                                                                    30000

    35000
                                                                                    25000

    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)
               76000

                                  24400

                                                                             3900                                          5300
                                                     3600
                                                                                                      1400                                       1200

            New Zealand           Auckland          Hamilton             Tauranga                   Wellington          Christchurch            Dunedin

    National population growth slowed in Q2 2020, from an annual pace of 2.3% in Q1 to 2.1%. Our population
    passed the 5m mark in the third quarter last year, and is now approaching 5.1m. As ever, the natural rate of
    increase (births minus deaths) remains pretty steady, at 6,000-7,000 people per quarter, or 25,000-30,000
    per year. Not surprisingly, it was the net migration part of the question that slowed the overall population
    growth rate in Q2. Stats NZ estimates that overall net migration from April to June was just 800 people, the
    lowest quarterly figure since 300 in Q2 2013.

    With borders closed, the gross flows of migrants (i.e. non-citizens arriving, non-citizens departing, kiwis
    leaving, kiwis returning) have all tailed off since March, and as noted above the net balance of all of these
    combined has also dropped. However, although the ‘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 about 20,000.

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

200,000                                                                    Net
                                                                           Arrivals
                                                                           Departures

150,000

100,000

 50,000

       0

 -50,000
        2002                 2006   2010    2014        2018

Comparison of old and new net migration series (12-month rolling totals)

100,000                                                                    Old method
                                                                           New method

 80,000

 60,000

 40,000

 20,000

       0

-20,000

-40,000
       2002                  2006   2010    2014        2018

Source: Statistics New Zealand                                                          9
Regional Building Consents
     New dwelling consents trend (consents per month)
     1,600                                                                                       Auckland region
                                                                                                 Waikato region
     1,400                                                                                       Wellington region
                                                                                                 Canterbury region
     1,200                                                                                       Rest of NI
                                                                                                 Rest of SI
     1,000

       800

       600

       400

       200

         0
          1995          1999          2003   2007        2011        2015        2019

     Despite being one of the hardest hit sectors of the economy during April’s lockdown and the immediate
     aftermath, residential construction activity is another area that has held up better than many would have
     expected in the past 2-3 months. Indeed, after an annual drop of 9% in new dwelling consents in the three
     months to May, growth has returned and consents in the three months to August were 5% higher than a year
     earlier. Over the past 12 months, there has been a total of almost 37,500 new residential dwelling consents
     issued, not far off the recent peak of about 37,900 in February.

     Much of the resilience of dwelling consents (and the previous strong growth) can be attributed to smaller
     dwellings, such as townhouses and apartments – especially in Auckland. This trend seems 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.

     Looking ahead, the previous peaks in dwelling consents mean that builders still have a solid pipeline of work
     for a number of months yet, potentially carrying them through well into 2021. In addition, with the available
     listings of existing houses running at multi-year lows, some households may continue to have little choice but
     to consider building a house in order to get the property that want. Meanwhile, both the Labour and National
     parties have indicated that they would continue with a strong state house construction programme,
     supporting the industry.

     That said, as banks continue to assess mortgages closely, it’s conceivable that construction finance will
     become harder to obtain – and a reduction in general household confidence (as unemployment rises) would
     also tend to dampen the demand for any finance, even if it’s available. These are headwinds for residential
     construction.

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 latest ANZ Roy Morgan measure showed consumer confidence holding steady in August and September, at a
score of around 100. These levels are lower than pre-COVID (e.g. 2019’s average was 120), but still higher than the
outright weakness we saw in April (85). Consumer confidence is also higher than was typical for much of 2008-09 when
the GFC was biting hard.

In other words, confidence amongst households has rebounded from the worst point of alert level four lockdown, but
there’s still significant caution. It’ll be interesting to see how the end of the wage subsidy affects consumer confidence,
but at the same time, there’ll be support coming through from continued low mortgage rates. On the whole, relative
caution amongst households certainly isn’t holding back the housing market to any great degree at present, but we do
need to keep an eye on the risks ahead.

As an aside, a similar message applies for business confidence – it’s generally lower than it was pre-COVID, but has
recovered from April/May’s lows. Again, however, any flow-through effects from this to the housing market don’t seem
to be too major at present.

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

      8%                                                                        70

      6%
                                                                                68
      4%

                                                                                66
      2%

      0%                                                                        64

     -2%
                                                                                62

     -4%
                                                             Full time          60

                                                            Part time
     -6%

     -8%                                                                        58
           1987                 1998                 2009                2020     1987    1990    1993    1996     1999   2002   2005   2008     2011      2014   2017    2020

                                                                                Number of Jobseeker
     Unemployment rate (%)                                                      Support claimants
     12
                                                                                240,000

     10
                                                                                220,000

      8                                                                         200,000

                                                                                180,000
      6

                                                                                160,000
      4
                                                                                140,000

      2
                                                                                120,000

      0                                                                         100,000
       1986       1990   1994   1998   2002   2006      2010   2014   2018            Jan-20     Feb-20   Mar-20     Apr-20   May-20    Jun-20    Jul-20      Aug-20     Sep-20

     In the second three months of the year, overall employment rose at a consistent pace of 1.6% from a year
     earlier, the same figure as Q1. However, this is less encouraging than it might seem. For a start, COVID and
     survey/sampling issues meant that the labour market data faced some distortions in the second quarter. But
     more importantly, full-time employment (which is the best for the wider economy) growth slowed from 2.1%
     in Q1 to just 1.4% in Q2, the lowest in almost eight years. Meanwhile, the data backed up other evidence
     suggesting that one way firms were dealing with the recession was to cut back hours – indeed, part-time
     employment (which had been falling for most of 2018 and 2019 as some people switched to full-time work)
     grew by 2.5%.

     The labour force participation rate (people employed or looking for work as a percentage of the working age
     population) also dropped below 70% in Q2 – for the first time in four years – as some people left the
     workforce altogether, in some cases because they simply couldn’t look for work during lockdown. This also
     resulted in a ‘quirky’ unemployment rate result for Q2 of 4.0% (despite COVID it was lower than Q1’s 4.2%), as
     those people who physically couldn’t look for work weren’t counted as unemployed.

     Looking ahead, with the wage subsidy now winding down, the unemployment rate seems pretty likely to rise
     from now on, and most forecasts are that it will peak at about 8% next year or even into 2022. Indeed, data
     from the Ministry of Social Development on Jobseeker Support claimants suggests that the unemployment
     rate may already have risen to about 6%. 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
In the past few months, the Reserve Bank (RBNZ) has                Mortgage Interest Rates (%)
reaffirmed its commitment to ensuring that the economic            25
recovery won’t be undermined by the general bank                                                                     2 year fixed rate
funding/lending or interest rate environment – their asset                                            Floating mortgage interest rates
purchase programme now stands at $100bn out to June                20

2022, NZ could have a Funding for Lending Programme
(where the RBNZ lends directly to banks at the official cash       15

rate or close to it) before the end of 2020, and we might
also have a negative OCR early in 2021. The RBNZ has also
                                                                   10
emphasised that it wants to prevent unnecessary job
losses now, and it is prepared to live with the
consequences for asset prices – i.e. that they’ll continue to       5

face upwards pressure from low interest rates. Also bear in
mind that the mortgage payment deferral scheme will still           0
run until March next year, the extra bank capital                    1965        1971   1977   1983      1989   1995     2001    2007   2013   2019

requirements have also been delayed, and the loan to
value ratio speed limits are likely to be on hold until at least
May.
                                                                   Official Cash Rate and Mortgage Rates (%)
                                                                   12
                                                                                                                                OCR history
In this environment, it’s no surprise that mortgage rates                                                                   OCR projection
continue to drift downwards, and most indications suggest          10                                                  2-yr fixed mortgage
that a typical one or two year fixed rate might be below 2%
next year. It’s worth noting that higher debt levels do mean        8

that if/when mortgage rates eventually rise, households
will need to be careful. But for now, higher mortgage rates         6
are a long way away, and continued ultra-low rates point to
scope for further growth in property values in 2020 and             4
2021.
                                                                    2

                                                                    0
                                                                        2000                             2009                           2018

                                                                   Average Two Year Fixed Mortgage Rates (%)
                                                                   5.2%

                                                                   5.0%

                                                                   4.8%

                                                                   4.6%

                                                                   4.4%

                                                                   4.2%

                                                                   4.0%

                                                                   3.8%

                                                                   3.6%

                                                                   3.4%
                                                                          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.

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

                                                                    3,000
3,000

                                                                    2,500
2,500

                                                                    2,000
2,000

                                                                    1,500
1,500

                                                                    1,000
1,000

 500                                                                 500

   0                                                                   0

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)

     2,000

     1,500

     1,000

       500

          0

      -500

     -1,000

     -1,500

     -2,000

     -2,500

     -3,000
              2016                   2017                2018                  2019                  2020

          Investor             Owner-occupier

     After the tumultuous period in April/May when mortgage lenders had to focus on their existing clients and
     process a large number of mortgage payment deferral applications (as well extensions to loan lengths and
     switches to interest-only payments), attention has now firmly switched back to new mortgage lending activity.
     Indeed, in July, new lending surged back up to $6.6bn (about $680m higher than a year earlier) and rose even
     further to $6.8bn in August – a massive $1.4bn higher than the same month in 2019.

     However, despite the temporary removal of the loan to value ratio (LVR) speed limits, the bounce-back in
     mortgage flows hasn’t been driven by a rebound in high LVR lending or a surge in interest-only lending.
     Indeed, in August, interest-only lending only accounted for 26% of the total – still way below the figures of 40%
     in 2015-16. Meanwhile, the share of August’s lending at 80% LVR or above was only 11% – for context, bear in
     mind that the previous high LVR speed limit for owner-occupiers was 20% (and for investors it was 5%).

     In other words, banks are still keeping a pretty close eye on lending standards. In addition to the continued
     deposit requirements, stringent testing of income is still being carried out, as well as checking that a borrower
     could pay the mortgage at today’s interest rates (circa 2.5%) but also in an alternative scenario where rates
     spiked to somewhere around 6-6.5%. Mortgage pricing is most attractive to borrowers at a fixed term of
     about one year at present. Hence, it’s not surprising that nearly 60% of the stock of existing mortgages are
     fixed for up to one year. About 30% of loans are fixed for more than one year, leaving only a small share on
     floating rates.

16   Sources: Reserve Bank of New Zealand
Looking ahead, the availability        High LVR Lending to Owners and Investors (% of new lending)
of mortgage finance looks set
to stay pretty favourable for          25%
borrowers. After all, the
Reserve Bank has
acknowledged that it does not
                                       20%
want to risk a recession and job
losses just because credit has
been prevented from flowing
(or because banks face funding         15%
pressures arising from savers
ending their term deposits due
to low returns). To this end,          10%
pretty shortly we could have a
Funding for Lending
Programme in NZ, where the
                                       5%
RBNZ lends directly to banks, at
an interest close to or at the
OCR. These funds would then
be available to lend out as            0%
                                         2014           2015       2016         2017             2018   2019        2020
mortgages or business loans at
low interest rates.

Finally, it’s worth bearing in         Refinancing Profile for Mortgages (% of stock)
mind that although very few            40%
new applications for mortgage
payment deferrals are being            35%
processed each week at
present, there are still many
                                       30%
existing deferral plans that will
run through to March next year.
                                       25%
It’ll be important to keep an eye
on how smoothly they roll off
those deferrals from April.            20%

                                       15%

                                       10%

                                        5%

                                        0%
                                                        Floating                Fixed < 1 year           Fixed > 1 year

                                             Investor          Owner-occupier

Sources: Reserve Bank of New Zealand                                                                                       17
Sales Volumes
     After the distortions of April/May, it’s fair to say that   Nationwide Sales Volumes
     the subsequent rebound in property sales volumes            (monthly total)
     has been rapid. The estimated total for September
     (both agent and private) of almost 9,700 was the            14,000
                                                                 13,000
     highest for any month since May 2016 and also the
                                                                 12,000
     sixth highest of any month in the past 15 years or          11,000
     so. The rebound in activity has been seen in most           10,000

     parts of the country – and it’s worth noting that            9,000
                                                                  8,000
     sales activity may have been even higher still, were it
                                                                  7,000
     not for the low supply of property listed and actually       6,000
     available to buy.                                            5,000
                                                                  4,000

     There’s no denying that genuine, new demand has              3,000

     come forward to buy property in the past few                 2,000
                                                                  1,000
     months – not least from investors who are unhappy                0
                                                                           1996    1999      2002        2005     2008   2011     2014        2017      2020
     with low term deposit rates and can also now get
     into the property market with a 20% deposit rather
     than the previous 30%.                                      Nationwide Annual Change
     However, some of the strength in property sales             in Sales Volumes (%)
     volumes in the past few months is also likely to be
     some ‘catch up’ for the earlier weakness. Indeed, the        40%

     cumulative total for the year to date in 2020 is still a
                                                                  20%
     touch below where it was in 2019, suggesting that to
     some degree there has been a shift of activity out of         0%

     April/May and into the more recent months.
                                                                 -20%

     Looking ahead, the environment looks favourable             -40%

     for more solid levels of property market activity in
     the coming months. Admittedly, with the wage                -60%

     subsidy winding down, we need to be wary of the             -80%

     threat of higher unemployment. However, mortgage                      1996    1999      2002       2005     2008    2011     2014    2017         2020

     rates are low and potentially set to fall even further,
     so this points to support for property market activity
     levels and prices.
                                                                 Regional Sales Volumes
                                                                 (year-on-year % change)

                                                                 40%

                                                                 35%

                                                                 30%

                                                                 25%

                                                                 20%

                                                                 15%

                                                                 10%

                                                                  5%

                                                                  0%      29 .7%    42 .0%          29 .0%      37 .7%   26 .7%      18 .6%          9 .7%
                                                                           NZ        AUK             HAM         TAU      WE L        C HC           DUN

18   Source: CoreLogic
Values
After a lot of uncertainty from   Average Value of Housing Stock - New Zealand ($)
April to June about how
property values might fare
                                                                                                                              $743,678
during the COVID phase and
                                  $700,000
economic recession, that mood
has turned more positive lately
and indeed values themselves      $600,000
have generally continued to
hold up across the country –
                                  $500,000
primarily reflecting low
mortgage rates and the tight
supply/demand balance of          $400,000

property on the market.
                                  $300,000
In September, national average
property values rose by 0.8% in                                                                  $   7   4   3    , 6   7    8
the month, to stand at almost     $200,000
$744,000. That also left the
three month change at 0.8%
                                  $100,000
(values had held steady in July
and August), and they’re
currently 2.1% higher than six           $0
months ago. The annual change                        2005          2008      2011           2014                 2017             2020
perhaps isn’t the most useful
measure at present, given that    Annual and Quarterly Change in Value (%)
it looks back to pre-COVID
September last year, but for      20%
what it’s worth that figure is
currently 7.6%.
                                  15%
On the whole, the performance
of property values in the past
few months has certainly defied   10%
the gloomy predictions from
April/May and it would appear
that the momentum for values       5%
is firmly upwards for now. That
said, we shouldn’t get carried
away – small falls in values       0%

couldn’t be ruled out if
unemployment rises more
                                  -5%                                            Quarterly Change                            $5,660      0 .8%
sharply over 2021 than is
                                                                                 Annual Change                              $52,281      7 .6%
currently envisaged, and
                                                                                 5 Year Change                          $204,691         38%
borrowers rolling off mortgage
                                  -10%
payment deferrals perhaps find
it tougher than they thought.                 2005          2008          2011            2014               2017                2020

                                    Annual Change %
                                    Quarterly Change %

                                                                                                                                            19
House Price Index
     The general resilience of national property values     Average Dwelling Value ($)
     to COVID-related uncertainty, economic recession,
     and rising unemployment has been mirrored in                          New Zealand
                                                            $1,000,000     Auckland
     each of the main centres.                                             Hamilton
                                                                           Tauranga
                                                              $800,000     Wellington
     In Auckland, average values have actually dipped a                    Christchurch
                                                                           Dunedin
     little in the past three months (-0.4%), but over a
                                                              $600,000
     longer period are currently 1.2% higher than six
     months ago. Those rises have been driven by
                                                              $400,000
     Franklin, Papakura, Waitakere, and Manukau, with
     Rodney, City, and North Shore a little softer (but       $200,000
     still with values higher than they were six months
     ago).                                                         $0
                                                                            2008          2011    2014   2017    2020
     Elsewhere, Hamilton and Wellington have been
     solid performers in the past few months, with
     average values up by 3.2% and 1.7% respectively since June. Compared to a year ago, values in both those
     centres are up by around the 10% mark. Tauranga’s values edged down by 0.3% in September alone and have
     been flat since June. But continued growth over April to June means that values there are still 2.9% higher
     than six months ago.

     In the South Island, both Christchurch and Dunedin have seen average values rise by around 1.5% since
     March. However, Dunedin’s values have been flat since June and there are signs that the previous strong
     upwards momentum in that part of the country has eased. That wouldn’t be surprising, given that a sustained
     upswing since around 2015 has seen housing affordability pressures emerge.

                                                      September 2020
                              Current value       1 month        3 months           12 months             5 years
     New Zealand                 $743,678           0.8%           0.8%                    7.6%            38%

     Auckland                   $1,078,326          0.5%           -0.4%                   5.0%            20%

     Hamilton                    $647,777           0.8%           3.2%                    9.7%            56%

     Tauranga                    $795,182           -0.3%          0.1%                    6.4%            58%

     Wellington                  $797,196            1.1%          1.7%                   11.4%            74%

     Christchurch                $522,057           0.5%           0.7%                    5.0%            10%

     Dunedin                     $547,429           0.4%           0.0%                   15.6%            81%

20
Annual Value Change (%)

-9%                               21%

© 2020 Mapbox © OpenStreetMap

Over a longer horizon of 12 months which includes both pre- and post-COVID phases,
average property values have risen in almost all parts of the country, with strength most
evident around Dunedin and Southland, as well as the central and lower North Island.
Queenstown clearly stands out as hardest hit part of the country.

                                                                                            21
Three Month Value Change (%)

     -2%                             5%

     © 2020 Mapbox © OpenStreetMap

     Over the timelier three month (post-COVID) period since June, again there is stability or
     even further growth evident for average property values in most parts of the country.
     However, the most expensive parts of the country – i.e. Queenstown and parts of Auckland
     (namely City and North Shore) – have been 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 $444 per week in the three months to September, up by 3.3% from the same quarter a year earlier.
There isn’t any widespread evidence of rents falling across large parts of the country, although it is looking clearer that the
previous upwards momentum has slowed. Indeed, for most of 2019, rental growth was averaging more than 5% annually,
so the slowdown to around 3% is quite marked.

Many of the main centres are still seeing solid demand for rental property and, with listings also relatively restrained, rents
are holding firm (albeit growth rates have slowed). Auckland’s figure for the three months to September was 2.0% higher
than a year earlier, with Christchurch at 2.5%. In Hamilton and Tauranga, average weekly rents are growing at rates of more
than 4% per annum. Dunedin is still seeing growth too.

Outside the main centres, however, the trends are a little patchier. There are still hotspots in areas such as Gisborne (14.5%
rise in rents in the past year), Invercargill (12.4%), and Palmerston North (11.5%). But there is clearer weakness for example
in Carterton (1.4% decline in rents), Central Otago (-4.1%), and especially Queenstown (-16.7%). That illustrates the effects of
the closed borders on our most tourism-dependent area, and translates into a fall in weekly rents from almost $590 a year
ago to just $490 now.

Rental yields around the main centres range from 2.6% in Auckland up to 3.9% in Dunedin. 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                                    $533                                  2.0%                         2.6%

 Hamilton                                    $405                                  4.2%                         3.3%

 Tauranga                                    $502                                  5.1%                         3.3%

 Wellington                                  $500                                  0.7%                         2.9%

 Christchurch                                $357                                  2.5%                         3.6%

 Dunedin                                     $406                                  9.4%                         3.9%
                                                                                                                              23
Buyer Classification
     Buyer Classification –                                            NZ Property Transfers by Non-Citizens
     New Zealand (% of sales)                                          or no Resident Visa (% of total
                                                                       transfers)
                                                                       3.5%

                                                                       3.0%
     30% 30%

                                                                 26%
           26%                                                         2.5%
                                                                 25%
                                                                 25%
           21%
                                                                       2.0%
     20%

                                                                       1.5%

     10% 10%                                                     12%   1.0%

           5%                                                    5%    0.5%
           4%                                                    5%
           4%                                                    2%
      0%                                                               0.0%
           2005     2008     2011      2014     2017      2020

      Mover                Multiple property owner mortgage                   Investor     Owner-occupier
      First home buyer     Multiple property owner cash
      New to market        ReEntry       Other

     The third quarter of the year saw a continued strong presence for first home buyers (FHBs) and mortgaged
     multiple property owners (MPOs, or investors) in the market, but existing owner-occupiers (movers)
     continued to sit on the sidelines in many cases.

     Starting with mortgaged investors, their share of purchases rose from 24% in Q2 to 26% in Q3, the highest
     figure since Q3 2016 (which was just prior to the Reserve Bank introducing the 40% deposit requirement for
     investors). 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%.

     The share of property purchases in Q3 made by first home buyers (FHBs) was 25%, up from 23% in Q2, and
     the highest figure in the history of our Buyer Classification series (topping the previous peak of 24% in
     2006-07). In some cases, FHBs are accessing the property market by switching property type (e.g. standalone
     house to apartment) or looking at cheaper, more peripheral locations. However, FHB demand has also been
     boosted by would-be OE’ers who are now instead buying a house earlier than anticipated, as well as any
     returning kiwis who are also entering the property market without owning before. The upwards trend in
     KiwiSaver balances has also boosted deposits for some FHBs and gives them a small advantage over other
     buyer groups.

     Looking at movers, their share of purchases dipped to just 25% in Q3, an historically low level. In some cases,
     existing owner-occupiers are choosing to stay where they are due to already high debt levels and the extra
     costs of moving house (such as legal, estate agent etc). But in other cases, people 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.

     Looking ahead, it wouldn’t be a surprise to see these broad trends remain in place over the next few months,
     with investors and FHBs still remaining pretty active, but movers quieter.

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%
     30%

           28%                                               29%          32%
           27%                                               28%   30%
           27%                                                                                                                      27%
     20%
                                                             20%                                                                    21%
                                                                          21%
                                                                   20%                                                              20%
                                                                          19%
                                                                                                                                    15%
     10%                                                     11%          12%
                                                                   10%
           7%                                                              8%                                                       7%
                                                             6%                                                                     7%
           4%                                                5%            4%
                                                             1%            4%                                                       2%
     0%                                                            0%
           2005   2008    2011     2014      2017     2020                 2004   2006   2008   2010   2012   2014   2016   2018   2020

      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 composition of Auckland’s property purchasers in the last three months has broadly mirrored the
     national trends, with first home buyers and mortgaged investors showing a strong presence, but existing
     owner-occupiers (movers) not particularly active.

     The share of purchases going to FHBs in Auckland in Q3 was 29%, up from 26% in Q2, and on a par with the
     previous peak back in 2006. As with the trends nationally, FHBs in Auckland are accessing the market via
     being willing to compromise on the property type or location, as well as using their KiwiSaver to fund the
     deposit.

     Mortgaged investors also raised their share of purchases in Auckland in Q3, up from 26% in Q2 2020 to 28%.
     That’s the highest figure in around three years, and again reflects cheap borrowing costs, low returns on
     other assets, and also the ability to enter with a lower deposit than before.

     Meanwhile, the activity from movers has plunged around Auckland in recent months, with their share of
     purchases only coming in at 20% in Q3. The lack of available listings will be a factor keeping more existing
     owner occupiers where they are, but there’s also a pretty clear trend for Aucklanders to want to renovate
     rather than relocating at present.

     Around Auckland’s neighbouring areas, the mix of buyers is quite different in Northland, with movers
     accounting for the highest share of activity so far in 2020, at 29% (albeit only 27% in the Q3 alone). It’s also
     different to see that first home buyers have lost a little market share in Northland so far this year (although it
     did tick up in Q3), but in tune with the rest of the country, investors’ presence has increased over the past few
     quarters.

26
Auckland Values
Average value of housing stock                                   Annual and quarterly value change
Auckland ($)                                                     Auckland (%)
$1,100,000
                                              $1,078,326
                                                                 25%

$1,000,000

                                                                 20%
 $900,000

 $800,000                                                        15%

 $700,000
                                                                 10%
 $600,000

 $500,000                                                         5%

 $400,000

 $300,000
                           $1,078,326                             0%

                                                                 -5%                                                         -$4,215    -0 .4%
 $200,000                                                                                      Quarterly Change
                                                                                               Annual Change                 $50,934    5 .0%
 $100,000                                                        -10%                          5 Year Change             $181,525        20%

             2005   2008    2011       2014     2017    2020              2005          2008   2011            2014   2017             2020

                                                                   Annual Change %
                                                                   Quarterly Change %

Generally speaking, average property values across Auckland have held up pretty well in this post-COVID phase, even
though Auckland has obviously experienced more disruption than the rest of the country.

Over the past three months, Franklin and Papakura have seen values rise by about 2%, while Waitakere, Manukau, and
Rodney have also seen continued increases, albeit at slower rates.

In the more expensive parts of Auckland, i.e. the old City TA (central area) and the North Shore, the past three months have
been a little softer, with declines in average property values of 1.2% and 0.9% respectively. However, in September alone,
both of those areas saw values rise, so the dips on a three-month basis reflect sluggishness in July and August – which may
now have come to an end.

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 value gains in cheaper
parts of Auckland, but a more subdued picture in the central city/North Shore

                                                                    SEPTEMBER 2020
                              Current value            1 month            3 month              12 months               5 years
Rodney                             $985,539             -0.2%                0.3%                 4.7%                       29%

North Shore                        $1,235,527           0.7%                 -0.9%                5.3%                       17%

Waitakere                          $863,707             1.0%                 0.7%                 6.2%                       20%

Auckland City                      $1,262,799           0.5%                 -1.2%                3.9%                       19%

Manukau                            $945,550             0.4%                 0.6%                 6.7%                       24%

Papakura                           $740,029             0.4%                 1.6%                 6.2%                   30%

Franklin                           $711,065             0.7%                 2.2%                 5.9%                       28%

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

     Generally speaking, property values around the country (except for Queenstown) have been more resilient
     since lockdown than was initially predicted. 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. As at September 2020, Herne Bay remains the highest priced
     suburb in Auckland, with a median property value of $2.71m. Auckland Central has the lowest median value
     (reflecting its concentration of apartments), at about $540,000. Only four suburbs have a median value
29
Hamilton Market Activity
     Buyer Classification – Hamilton                                            Buyer Classification – Waikato region
     (% of purchases)                                                           (% of purchases)
                                                                                40%
     40%

                                                                          35%                                                                       32%
     30% 31%                                                                    30% 31%

            27%                                                           26%
            25%                                                                        25%
                                                                                                                                                    22%
     20%                                                                        20%
                                                                                                                                                    19%
                                                                          19%          17%
                                                                                       14%                                                          14%
                                                                          12%
     10%                                                                        10%
             7%                                                                         6%
                                                                          4%            4%                                                          5%
             4%                                                                                                                                     5%
             3%                                                           3%            3%
                                                                          1%                                                                        2%
     0%                                                                         0%
                  2006   2008   2010   2012   2014   2016   2018   2020                  2004   2006   2008    2010   2012   2014   2016   2018   2020

           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 third quarter of 2020, mortgaged investors accounted for 35% of property purchases in
     Hamilton, well above the national figure of 26% (which itself was pretty high). After easing lower throughout
     2019, the market share for cash investors has also rebounded lately in Hamilton (currently 12%).

     Meanwhile, first home buyers held steady at a 26% share of purchases in Hamilton in Q3. That’s pretty much
     in line with where the share for FHBs has hovered for about the last two years now, and certainly much higher
     than the trough of just 17% in Q3 2015 (when mortgaged investors were running at a rampant 40% share).
     Finally, the share going to movers fall away in Q3, and is now just 19%, a record low.

     Around the wider Waikato region (excluding Hamilton), buyer classification patterns in Q3 saw movers’ share
     hold relatively steady (at about 32%), but FHBs and mortgaged investors edge higher – at the expense of cash
     investors (which fell from 17% in Q2 to 14% in Q3).

30
Hamilton Values
Average value of housing stock                                Annual and quarterly value change
Hamilton ($)                                                  Hamilton (%)
                                             $647,777
$600,000                                                      30%

                                                              25%
$500,000
                                                              20%

$400,000
                                                              15%

                                                              10%
$300,000

                                                               5%

$200,000
                                                               0%

$100,000                                                       -5%
                                                                                             Quarterly Change          $20,000   3 .2%
                                                                                             Annual Change             $57,277   9 .7%
                                                              -10%
     $0                                                                                      5 Year Change           $231,487     56%

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

Hamilton’s average property values have been pretty strong in the past few months, up by 0.8% in September alone and by
3.2% since June. The level is now just short of $648,000.

The growth in September was pretty broad-based across Hamilton, albeit South East did see a small dip of 0.5%. But over a
three-month horizon, all parts of the city have seen increases (ranging from 2.4% up to 3.7%), and looking on an annual
basis South East and Central & North West are into double-digit gains.

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

Hamilton Central &
                                  $608,988           2.6%                  3.7%                12.4%                  57%
North West

Hamilton North East               $787,131           1.4%                  2.6%                6.9%                   49%

Hamilton South East               $601,129           -0.5%                 2.4%                10.1%                  57%

Hamilton South West               $580,378           0.4%                  3.3%                 9.9%                  59%

                                                                                                                                   31
Tauranga Market Activity
     Buyer Classification – Tauranga                                             Buyer Classification – Bay of Plenty
     (% of purchases)                                                            region (% of purchases)
                                                                                 40%
     40%

                                                                                 30%   30%
            33%
     30%
                                                                           31%                                                            27%
                                                                                       27%
                                                                                                                                          25%
                                                                           25%                                                            22%
            23%                                                                  20%
     20%                                                                               18%
                                                                           19%
            16%                                                                                                                           14%
            15%                                                                        13%
                                                                           15%
                                                                                 10%
     10%
             6%                                                                         6%                                                6%
                                                                           5%                                                             5%
             4%
                                                                           4%
                                                                                        4%
             3%                                                                         3%                                                1%
                                                                           2%    0%
     0%
                   2006   2008   2010   2012   2014   2016   2018   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

     During the period from July to September, 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.

     Even so, both first home buyers and mortgaged investors increased their market share in Q3. For FHBs, the
     rise was from 17% in Q2 to 19%, and for mortgaged investors it was 23% to 25%. You have to go back almost
     three years for a time when mortgaged investors had a stronger presence in Tauranga than they currently
     have. Around the wider Bay of Plenty region (excl. Tauranga), mortgaged investors are also seeing a solid
     market share at present, with movers quieter.

32
Tauranga Values
Average value of housing stock                                  Annual and quarterly value change
Tauranga ($)                                                    Tauranga (%)

$800,000
                                              $795,182
                                                                30%
$700,000

                                                                25%
$600,000
                                                                20%

$500,000
                                                                15%

$400,000
                                                                10%

$300,000                                                         5%

                                                                 0%
$200,000

                                                                -5%
$100,000                                                                                       Quarterly Change              $993   0 .1%
                                                                                               Annual Change            $47,689     6 .4%
                                                                -10%
     $0                                                                                        5 Year Change           $292,411      58%

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

Tauranga’s average property values have lost a little steam since June, dipping by a minor 0.3% in September, which left
them flat for the past three months. However, gains from April to June mean that they’re still 2.9% higher than in March, and
6.4% above a year ago. The average value in Tauranga is now $795,200.

Momentum remains stronger in other areas such as Rotorua (rise in average values of 5.2% since June) and Whakatane
(2.0%), although the level of prices is still sub-$550,000 in both those markets.

                                                                                                                                           33
Wellington Market Activity
     Buyer Classification – Wellington                               Buyer Classification – Lower Hutt
     (% of purchases)                                                region (% of purchases)

                                                                     40%
     30%                                                       30%
           27%                                                 29%
           27%
                                                                     30% 30%                                                          32%
                                                                            30%
                                                                                                                                      28%
     20%                                                       20%          25%
                                                                     20%                                                              21%

     10%
                                                               8%    10%
           8%                                                                                                                         8%
                                                               6%            5%
           4%                                                  4%            4%                                                       5%
           3%                                                                3%                                                       3%
                                                               2%                                                                     2%
      0%                                                             0%
           2005    2008       2011    2014     2017     2020                 2004   2006   2008   2010   2012   2014   2016   2018   2020

           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 Q3, accounting for 30% of property purchases. But mortgaged
     investors continued to close the gap, rising from a 27% market share in Q2 2020 to 29% in Q3. Porirua has
     been a key contributor to that rise, with mortgaged investors there accounting for 28% of purchases so far in
     2020, up sharply from 24% in 2019.

     Meanwhile, existing owner occupiers are very quiet around Wellington at present, accounting for just 20% of
     purchases in Q3, a new 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).

     At a more detailed level, FHBs remain key in Lower Hutt (36% of purchases so far in 2020), while in Upper Hutt
     movers slightly retain the upper hand (33% share versus 31% to FHBs). Mortgaged investors and FHBs have
     close market shares in Wellington City (about 30% each), while there’s been a big rise for mortgaged investors
     in Porirua so far this year – up from 24% share in 2019, to 28% in 2020 to date. Over the hill, Masterton
     remains a movers market, as does South Wairarapa. Kapiti Coast has seen a rising market share for
     mortgaged investors this year, but movers still dominate.

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

$800,000
                                               $797,196

$700,000
                                                                  20%

$600,000
                                                                  15%

$500,000
                                                                  10%

$400,000

                                                                   5%
$300,000

                                                                   0%
$200,000

                                                                  -5%                            Quarterly Change          $13,541     1 .7%
$100,000
                                                                                                 Annual Change             $81,456   11 .4%

                                                                  -10%                           5 Year Change            $339,426     74%
     $0
           2005     2008     2011      2014    2017     2020                2005          2008   2011            2014   2017         2020

                                                                         Annual Change %
                                                                         Quarterly Change %

The wider Wellington property market has been resilient in recent months, with values having risen across the board since
June – ranging from 0.6% in Masterton up to 5.0% in South Wairarapa. Kapiti Coast, Porirua, and Upper Hutt have all had
gains since June of about 3% or more.

Perhaps reflecting the higher level of prices (almost $900,000) and tougher affordability, Wellington City itself has been a
little more subdued in terms of growth, but 1.3% in the past three months and 8.7% over the past year are still relatively
strong figures.

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

Porirua                             $710,763           2.7%                    2.8%                16.2%                       87%

Upper Hutt                          $661,211           1.5%                    3.4%                15.1%                       96%

Lower Hutt                          $697,171           1.2%                    1.6%                14.7%                       87%

Wellington City                     $899,358           0.6%                    1.3%                 8.7%                       65%

Carterton                           $496,900           0.8%                    4.2%                12.9%                       86%

Masterton                           $442,605           -0.2%                   0.6%                11.4%                       90%

South Wairarapa                     $607,813           7.3%                    5.0%                13.0%                       94%

Kapiti Coast                        $688,424           2.4%                    2.8%                12.3%                       79%

                                                                                                                                            35
Christchurch Market Activity
     Buyer Classification – Christchurch                                Buyer Classification – Canterbury
     (% of purchases)                                                   region (% of purchases)
     40%

                                                                        40%
            33%
                                                                               35%                                                   36%
     30%
                                                                  28%   30%
            24%                                                   26%
            23%                                                   21%
     20%                                                                       22%                                                   22%
                                                                        20%                                                          19%
                                                                               16%
                                                                  13%
                                                                               13%
     10%                                                                                                                             11%
                                                                        10%
             8%
                                                                  6%            6%                                                   6%
             4%                                                   5%            5%                                                   5%
             4%                                                                 3%                                                   1%
                                                                  2%
      0%                                                                0%
               2005     2008     2011    2014     2017     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

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

     Indeed, the market share for FHBs rose back from 25% in Q2 2020 to 28% in Q3 – pretty much as high as it’s
     ever been. Mortgaged investors have also continued their return from the lulls of 2018, and their market
     share rose to 26% in Q3, up from 24% a year ago. Movers’ market share in Christchurch was just 21% in Q3, 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 have been 32% of activity so far in 2020 (albeit down from 38% in 2019). Timaru has
     also seen the movers’ market share fall so far in 2020 (36% in 2019 to 32%), with mortgaged investors more
     active. Meanwhile, Selwyn has seen movers’ share top 40% this year, no doubt reflecting to some extent
     existing owners (either from Selwyn or other parts of Canterbury) seeking out a new-build. A similar pattern
     has been seen in Waimakariri in 2020 so far too.

36
Greater Christchurch Values
Average value of housing stock                                  Annual and quarterly value change
Christchurch ($)                                                Christchurch (%)
                                             $522,057
$500,000

                                                                  35%

                                                                  30%
$400,000

                                                                  25%

                                                                  20%
$300,000

                                                                  15%

                                                                  10%
$200,000
                                                                   5%

                                                                   0%
$100,000
                                                                  -5%                           Quarterly Change             $3,688      0 .7%
                                                                                                Annual Change               $24,767      5 .0%
                                                                  -10%
     $0                                                                                         5 Year Change               $47,243      10%

           2005   2008     2011      2014     2017    2020                  2005         2008   2011          2014   2017             2020

                                                                         Annual Change %
                                                                         Quarterly Change %

Christchurch’s housing affordability is better than each of the other main centres and although this may not necessarily set
it up for immediate outperformance, it does help to explain a little about why values have been resilient to the recession.
Across the city as a whole, average values now stand at $522,057, about 1.5% higher than six months ago. Each sub-market
in Christchurch has also held up pretty well in recent months, and Selwyn and Waimakariri have also shown growth in the
past three months (0.4% and 0.9% respectively).

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

Banks Peninsula                   $552,939            2.9%                   2.6%                      6.6%                    12%

Christchurch Central &
                                  $609,761            0.3%                   0.4%                      4.8%                    10%
North
Christchurch East                 $395,749            0.7%                   0.7%                      4.6%                    10%

Christchurch Hills                $709,894            -0.3%                  0.0%                      4.9%                    11%

Christchurch Southwest            $497,464            0.9%                    1.1%                     5.0%                    10%

Selwyn                            $569,967            -0.1%                  0.4%                      2.5%                    10%

Waimakariri                       $469,805            0.7%                   0.9%                      4.1%                    13%

                                                                                                                                                 37
Dunedin Market Activity
     Buyer Classification – Dunedin                                  Buyer Classification – Otago
     (% of purchases)                                                region (% of purchases)
                                                                     30% 30%
     30%
           29%                                                 27%
           28%                                                 27%                                                                  24%
                                                               26%         23%                                                      22%
                                                                     20%                                                            22%
     20% 20%                                                               18%                                                      19%

                                                                           15%

                                                                     10%
     10%
                                                               9%                                                                   8%
           8%
           7%                                                              6%
                                                               4%          5%
           4%                                                  4%                                                                   3%
                                                                           3%
                                                               2%                                                                   2%
      0%                                                             0%
           2005    2008       2011    2014     2017     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

     Mortgaged investors remained a key buyer group in Dunedin in Q3, with 27% of purchases – more or less a
     record high. However, it was perhaps even more interesting that the share of purchases made by first home
     buyers also climbed to 27%, and the share for movers dipped to 26%. That is the first time in the 15 year
     history of this series that FHBs have had a higher quarterly market share than movers in Dunedin. Once again,
     the lack of listings is likely to be a key factor for why more owner occupiers are choosing to stay where they
     are.

38
You can also read