Kelvin Davidson: Corelogic Chief Property Economist on property values rising

A return to growth in New Zealand's housing market. 

Corelogic's Home Value Index saw property values rise by 0.3 percent in February -- the strongest increase in more than a year. 

That follows a cumulative negative 4.1 percent decline from March to September last year. 

Chief Property Economist, Kelvin Davidson says [told Andrew Dickens] he thinks the housing market's returned to a more stable phase, post-pandemic. 

He says with wage growth coming through, there's a path to reasonably stable house prices ahead. 

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Episode Transcript

Speaker 1 (00:00):
Now we might have some signs of life in the
housing market. Core Logic's latest numbers are showing a point
three percent rise in property values in February. Now that
follows a four point one percent drop over March to
September last year. This is the biggest game since January
last year. So is this the sign of a recovery. Well,
someone who will know this is Calvin Davidson, whose core

(00:21):
Logic's chief property economists, and he joins it now, Hello, Calvin,
good morning. Why's it going up?

Speaker 2 (00:29):
Well? Interest rates basically, I mean we've seen before the
impact that lower interest rates can have, and I think
we're seeing there again. There are still restraints as well,
things like the week of labor market. There's a lot
of listings out there, so I think you'd probably still
call it a buyer's market. But certainly the impact of
lower interest rates is huge. People can just have a
bit more cash to spend on a house, all right.

Speaker 1 (00:50):
Well, prices are down nearly seventeen percent from the peak
in the middle of the pandemic, where we just decided
to buy houses because we had nothing else to do.
But we're still well above the pre COVID numbers. By
seventeen percent, So are we going to continue to be
so volatile?

Speaker 2 (01:05):
I think we're probably setting into a more stable phase
and the interest rates hopefully have settled down a bit.
I think COVID's five years on now, so you think
we're back to some kind of normality. We've got a
little bit of wage growth coming through, so you think
that there's a recently steady path of the house prices ahead.
But I don't think we're going to go into a
new boom because there are those restraints out there. There

(01:27):
still are a lot of listings. Affordability is a challenge,
and this time we've got debt to income ratio restrictions
which we didn't have last time. So as interest rates
come down, particularly those test rates at the benks, the
internal rates they check affordability with. As they come down
that's been in debt to income ratios start or start
to take hold, then they will sort of limit loan

(01:48):
sizes and limit house prices. So there's sort of forces
in both directions.

Speaker 1 (01:51):
I guess we've always talked about house supply. Is that
still a problem.

Speaker 2 (01:56):
Well, I think really the I mean measuring housing housing
shortages is a little bit tricky but I think at
the moment there's a general feeling in the market's fairly balanced,
and we've seen that. Okay, the construction sector has been
in the downturn over the past couple of years, but
prior to that had a huge boom. Some of that
tail end of those properties are still coming through, still

(02:16):
being put into the market or finished. So I think
supply and demand are probably fairly well balanced. Actually, we've
had net migration tail off a lot, so population growth
has slowed down. So I just think the risks of
shortages and I guess spikes and house prices driven by
not having enough houses, I think those risks are much
less than the past.

Speaker 1 (02:36):
And can New Zealanders still bank on their biggest asset
continuing to appreciate year on year or not?

Speaker 2 (02:44):
I think so. Yeah. I mean, you tend to see
through time a bit of general inflation, you tend to
see some wage growth, we tend to see population growth.
All of those underlying fundamentals, if you like, supportive for
house prices. But yeah, I just think it's probably a
steadier past than perhaps some of the big booms who've
seen historically, partly because of those debt to income raciare
restrictions and maybe just maybe there's a wee bit of

(03:06):
a societal change going on where people are actually realizing
iver rising house prices are not necessarily a good thing,
especially for the next generation trying to buy, So had
to measure, had to say if that's for sure, but
just a sense that's going on. So I think we'll
see rising house prices, but maybe sly in the past.

Speaker 1 (03:25):
Well that's good news, Kelvin, and I thank you for
joining us. Kelvin Davidson, core Logic's chief property economists. For
more from

Speaker 2 (03:31):
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