Brendan Larsen: Milford Asset Management expert on the state of the international housing market

New reports indicate the global housing market has entered a significant downturn.

Existing home sales have neared recessionary levels and new home sales are expected to fall.

Milford Asset Management's Brendan Larsen explains further.

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Episode Transcript

Speaker 1 (00:00):
Here the water waste of wireless can do it for
far less. Corus shares the real winner here. Thanks Matt.
Sixteen past six. Now let's have a look at the
international housing market. Brendan Larsen from Milford Asset Management is
with me at Brendan.

Speaker 2 (00:12):
Good evening.

Speaker 1 (00:12):
So we've had a bit of data, new data on
the US housing market out today. How are things looking
to you?

Speaker 2 (00:19):
Yeah, so sort of a bit of a continuation of
some softer data we've seen. So housing market data this
morning show an unexpected decline in prices, So that sort
of added to a recent space of sort of weaker data.
We've seen housing starts, for example, that down about seventeen
percent already this year, we've seen a surge and sort
of the number of sellers versus by it. So this

(00:40):
differential is now the widest since twenty thirteen. So looking
at sort of existing home sales as well, that continues
to fluctuate sort of around recessionary levels. So a number
of data points all sort of pointing in the wrong
direction at the moment.

Speaker 1 (00:53):
What's been driving the shift? Because I thought the US
housing market had been pretty resilient.

Speaker 2 (00:58):
Yeah, it had been resilient. And it's probably a good
point to touch on. I guess US households typically borrow
our thirty year mortgages, so once they've locked in their
mortgage rate, they're typically less sensitive term movements and short
term rates. So when the FED began hiking, it meant
those that already locked in long term mortgages didn't feel
the pressure as much as as others. Perhaps consumers have

(01:19):
also done quite well in the US with sort of
wealth gains and income gains, and so that's been supportive.
But more recently, the sort of slowdown we've seen in
housing data has really come from a slowdown in economic
growth and a decline and consumer confidence really owing to
fiscal policy in the US, and so that's really what's changed.

Speaker 1 (01:38):
Okay, So how does the performance of the US housing
market compare to our own one?

Speaker 2 (01:43):
So US house prices are up about sixty five percent
since twenty nineteen, having fallen less in recent years. It's
showing signs of softening. As we just sort of touched on.
New Zealand, property prices are up about thirty percent since
twenty nineteen and remain substantially off their peak spite a
significant amount of interest rate cuts. Are really struggling to

(02:03):
gain momentum. Australian property prices, by contrast, they're effectively still
at all time highs, up about fifty percent since twenty nineteen,
and actually that average distorts some biggest state moves, so
Sydney and Perth prices are actually up fifty percent and
seventy five percent respectively. Auckland prices are up just twenty
percent over that same time period, so you can see

(02:23):
Australian housing has really outperformed New Zealand. I guess looking
at some of those sort of reasons why, perhaps it's
really to do with demographics and the sort of supply
demand between sort of those regions. So Australia had enormous
population growth really by immigration as a result of a
strong jobs market, and that influx of people demanding housing

(02:45):
when supply was really low really supported the housing market.
New Zealand is quite a contrast, So despite immigration that
was actually really strong after COVID, those immigrants were generally
lower skilled and lower income, so we actually lost a
lot of higher income workers to Australia. So having that
sort of reduced demand at a time when supply was

(03:07):
increasing and regulation was making property investment a bit less attractive.
All of that sort of weight on prices in New Zealand, okay.

Speaker 1 (03:13):
And so what do you expect is going to happen
from here?

Speaker 2 (03:17):
Yeah, it's hard to tell. There's likely to be differences
across regions still. We think in the US, for example,
it's a little bit less clear. I guess on one hand,
consumer confidence probably does rebound a little bit, given sort
of tariff risks have subsided. But on the other hand,
long term rates are still quite high, so affordability does
remain an issue. Australian housing is probably a bit more upbeat,

(03:38):
so they've got rate cuts coming through now, they've still
got population growth and so that is really positive for
house prices in New Zealand. Anecdotally, I guess we're hearing
a lot of supplies coming to the market and so
that does pose a bit of a headwind to prices.
On a positive note, perhaps changes to foreign vier rules
that are being speculated, you know, could be a positive.

(03:59):
But for the time being, it does feel like we're
going to continue to sort of muddle along.

Speaker 1 (04:03):
Brendan, it's good to talk to you, mate, Thank you
for that, even if it's not altogether good news Brendan Larson,
Milford Asset Management.

Speaker 2 (04:11):
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