New listings of houses for sale stalled in September, according to online advertiser realestate.co.nz, but the usual spring surge is still expected in October and November, despite new lending restrictions coming into force today.
The site's marketing manager, Peter McKenzie, told BusinessDesk the 5.3 per cent fall in listings between August and September was the first such drop since 2007, but at this stage there was no evidence that sellers were holding off listing because of loan to valuation ratio restrictions introduced by the Reserve Bank of New Zealand.
The LVR restrictions are intended to curb highly leveraged borrowing to take some of the steam out of the housing markets in Auckland and Christchurch, in particular, which the RBNZ fears could become an investment bubble capable of harming the wider financial system if it bursts.
The online real estate service recorded a 0.1 per cent drop in the total number of houses listed between August and September, while new listings fell 5.3 per cent across the country, with Auckland listings down 3.1 per cent and Christchurch listings down 8 per cent.
In commentary on the figures, ASB economist Jane Turner said the drop reflected the lack of housing supply, which the bank argues will continue to drive house prices higher in coming months.
"The low level of new housing supply has contributed to an imbalance in the housing market and resulted in strong increases in Auckland and Canterbury house prices," said Turner, whose bank was forced to withdraw large numbers of pre-approved high LVR mortgages, a part of the market it had previously targeted.
While the RBNZ hopes that its high LVR lending restrictions will reduce demand by locking out some potential buyers from the market, ASB's Turner said "we expect the restrictions will only have a modest impact."
"We continue to expect house prices to increase strongly in these regions until new housing construction increases and interest rates lift", with the RBNZ expected to raise the Official Cash Rate from March next year.
McKenzie said it was too early to cite LVR restrictions as a reason for the drop in September listings.
"It's a wait and see with the changes that are happening, but historically we will see listings coming onto the market in October/November, and it's going to be quite welcome," he said.
Prime Minister John Key defended the RBNZ's move in a breakfast television interview on TV3, and reiterated to his weekly press conference yesterday that he had asked the RBNZ to exempt first home buyers from the restrictions, only to be advised that they would be less likely to work and that interest rates would rise further and faster than if the restrictions were put in place.
"Like all medicines, I don't necessarily like having to swallow it either, but what is the best thing overall for the economy?" said Key.