Nearly 30,000 more want to buy homes than want to sell

Any Reserve Bank relaxing of rules allowing banks to lend to more people with less than 20% deposits for homes would increase the number of “definite buyers” in the market from 5.9% to 7.3%.

Some 5.9% of adult New Zealanders say they are “definitely” looking to buy in the next twelve months. 

However, 4% only are definitely looking to sell.

This indicates a nationwide gap of 29,900 dwellings among definite sellers and buyers, according to the latest Horizon Research Housing Supply and Demand Survey.

If Reserve Bank Loan to Value Ratio (LVR) rules were to be relaxed a nett 9.6% of those who said they “may buy” in the next 12 months will become “definite” buyers. 

This rise in demand could aggravate the supply shortage, especially in Auckland, and to a lesser extent Wellington, and might result in further price rises in those areas, according to Horizon Research, which has been running the housing demand and supply survey since October 2010.

Horizon Research’s Manager, Grant McInman, says that over the past five years the number of dwellings sold on a seasonally averaged annual basis closely relates to the survey’s findings for those intending to “definitely” sell.

Currently supply is only 68% of demand (assuming one property is offered for sale for each respondent who is “definitely” going to sell) and the survey confirms under supply as one of the major issues driving the country’s big-city housing markets.

29,900 nationwide dwelling shortage

The survey finds the demand estimate for the next 12 months for those who “definitely want to buy” is 92,700 dwellings, down from 106,800 in February 2014.

This is equivalent to a national nett shortage – the gap between numbers of definite buyers and numbers of definite sellers - of around 29,900 dwellings to meet demand from those definitely intending to buy – down from 42,400 indicated in the February, 2014 HorizonPoll survey.

14,200 Auckland shortage

In Auckland the survey estimates an undersupply of 14,200 dwellings – down from 26,800 in the February HorizonPoll as a result of a drop in definite buying intention from 6.9% in February to 5.9% in November.  Supply has lifted slightly, from 2.4% of home owners definitely looking to sell in February, to 2.9%.  The total Auckland gap represents 47% of the national undersupply, down from 63% in February. 

7,700 Wellington shortage

Wellington’s oversupply, identified in the past three surveys, is now an undersupply, with a surge in definite buying intention from 5.0% in February to 8.7% in November, plus a significant curtailment of supply.  In the February 2014 survey, 8.7% of Wellington property owners were definitely looking to sell; in November the definite selling intention is down to 3.9%.

Christchurch

In Christchurch, which in February had an undersupply of dwellings, there is now a small oversupply, owing to a halving of definite buying intention – down from 7.0% in February 2014 to 3.4% in November 2014.  

The result of the question asking what would happen to definite buying and selling intentions if the Reserve Bank allowed banks to lend more to people without 20% deposits is:

Note: A relaxation of the rules would change around 10% of those who may buy into definite buyers, while 3.3% of definite buyers would change to definite non-buyers.  The nett effect is to raise definite buying intention from 5.9% to 7.3%.

The results reflect the gap between supply and demand for those already resident in New Zealand and do not take into account any impacts on demand of nett migrant gains or losses.

The Horizon Housing Demand and Supply Survey is of 1860 respondents nationwide aged 18+,  weighted to represent the adult population at the 2013 census. At a 95% confidence level the maximum margin of error is +/- 2.3%. Interviews were conducted between November 7 and 26, 2014.

Further reporting on this survey is available from Horizon Research.

Contact:

Grant McInman, Manager, Horizon Research Limited

Telephone: +64 21 0762040

E-mail: gmcinman@horizonresearch.co.nz