A post earlier this month “Mortgage approvals data adds to the stable of valuable property stats” examined the recent trend in mortgage approvals as released by the Reserve Bank matched to recent property sales data from REINZ.
A question posed in a comment on that article asked the question as to the history of mortgage approvals and sales to see if it were possible to see more clearly when extensive refinancing by people looking to take equity out of a property ceased as credit tightening occurred and property price appreciation ceased.
The great benefit of hosting an open communication through Unconditional is being able to listen and respond to questions from readers – this is a great case in point.
The chart below tracks the full history of mortgage approvals as published by the Reserve Bank matched to property sales going back to the beginning of 2004.
The chart I think perfectly demonstrates the history of the NZ property market from the perspective of leveraging the equity in the family home to free up cash for either consumption (cars, holidays, boats etc) or residential investment deposits. Through 2004 right up to the end of 2005 the rate of growth of mortgage approvals grew faster than property sales. The scale on the left and right axis are different, during that period monthly approvals for refinance and new finance grew from just over 25,000 to over 40,000 per month whilst sales were of the order of 8,500 per month.
Through 2006 and 2007, the two measures of property sales and mortgage approvals tracked very closely in trend terms with still a significantly higher number of mortgage approvals.
Strangely the 2008 year saw property sales fall, whilst mortgage approvals remained steady – this was the period when interest rates were dropped successively in late 2008 in response to the global economic crisis. Moving right up to date the last 6 months has for the first time see the level of mortgage approvals drop significantly below the trend of sales, currently with the latest monthly sales of properties around 5,000 per month with mortgage approvals of around 22,000 per month.
Update 22nd July
At the request of Tim Harris, the chart below tracks the data of mortgage approvals and property sales by month as a variance % for each month vs. the same month in the prior year.