Strong housing market drives retail spending

Auckland, New Zealand, Wednesday, 4 May 2016: Activity in the New Zealand housing market remains strong, with mortgage applications up 11.6 per cent year-on-year in the March 2016 quarter according to Veda, the leading provider of data analytics and credit information in New Zealand and a wholly-owned subsidiary of Equifax.

The latest figures show a slowdown in the mortgage application growth rate from the September 2015 quarter, when growth was at 21.9 per cent; however, the data indicates heightened housing activity remains, a trend that seems likely to continue.

Carol Chris, Managing Director, Veda New Zealand, said Veda’s mortgage application data, coupled with the strong New Zealand retail sales figures seen over the past several months, suggested a link between the active housing market and retail sales volumes.

“Electronic card spending at retail outlets in New Zealand was up 6.8 per cent in the March quarter, compared to the same period a year ago, according to Statistics New Zealand. This is a higher annual spending growth rate than reported in the second half of 2015,” Ms Chris said.

“The positive movement in mortgage application data and the decrease Veda has seen in credit card and personal loan applications over the same time period suggests that more home loans, rather than hire purchases or credit cards, are being used as an additional source of funds which is helping to drive retail sales growth,” she added.

The continued strength of mortgage applications was in contrast to the volume of personal loan and credit card enquiries to Veda, which declined by 2.9 per cent and 5.4 per cent respectively in the 12 months to the March 2016 quarter.

According to Veda’s data, the activity in the housing market continues to be driven primarily by consumers in the 28 to 43-year age bracket, which accounted for 46 per cent of mortgage enquiries in the March 2016 quarter.

In recent times, Veda has seen increased mortgage applications by consumers in younger demographics. The rate of enquiries by consumers younger than 28 years increased rapidly in the September 2015 quarter (up 38.1 per cent on the same period 12 months prior), but also experienced the greatest rate of deceleration in recent months, to a 22.1 per cent increase in the March 2016 quarter.

“Demand in the housing market, and the use of mortgage loans as a preferred source of additional funds for big-ticket retail spending, continues to be driven primarily by Gen X consumers, with Baby Boomers also accounting for a significant share of the market (37 per cent),” Ms Chris said.

“The dramatic activity shifts seen in the volume of mortgage loan enquiries by Gen Ys suggests that, while younger consumers are looking to enter the housing market, they are struggling to gain the same foothold as their older counterparts.

“Veda’s data clearly highlights the disparity between older, more financially stable consumers and the widely recognised ‘orphan’ segment of younger consumers across New Zealand, who are being locked out of the housing market,” she added.

Veda is leading the changes to New Zealand’s credit laws with the implementation well advanced.

For more information please contact: Philippa Hill philippa.hill@veda.com.au