Modest Start to Spring/Summer Housing Upgrades

Subdued start to house spruce up

Tuesday 3 October, 2017 - While buying houses tends to dominate the headlines, spending on our houses is a significant part of the retail sector. Typically spending on the house picks up in September and then rises to a seasonal peak in December. The start this year was modest in Auckland but stronger across the rest of the country.

A large number of Paymark merchants provide goods that are intended for the house, ranging from garden centres to hardware stores, from appliance shops to furniture outlets, and from fabric shops to carpet suppliers. Combined these merchants transacted $416 million spending through the Paymark payments network in September, up $32 million from August.

This is a modest start to the spring/summer housing upgrade. The annual growth of underlying spending through these housing-related merchants was a mere 3.5%.

A major contributor to the modest start this year is the softer Auckland housing market of late. Auckland house sales have been fewer this year and dwelling consents growth slower. The softer housing market has transferred to slow annual spending growth amongst Auckland/Northland housing-related merchants in recent months. Their annual spending growth rate through Paymark was 1.7% in September and has averaged only 0.6% in the last three months.

In the rest of the country, the housing-related merchants have fared better in total. Their spending growth was 4.8% in September, slightly higher than the average of 4.5% for the last 3 months.

In other sectors, a noticeable change has been the rapid slowdown in payment growth through Accommodation merchants since July (coinciding with the end of the Lions tour). Annual growth for Accommodation merchants was 2.1% in September, down sharply from 8.2% in July and an average 16.9% annual growth rate in the 12 months to June.

Across all sectors, payments through Paymark in September were $4,811 million. The annual underlying spending growth rate was a moderate 4.5%. The core retail sector maintained their recent trend growth while growth slowed in total amongst automotive and non-retail sector merchants. Seasonally adjusted, total underlying spending was unchanged between August and September.

For the quarter ended September, underlying spending increased 0.8%, seasonally adjusted, similar to growth during the June quarter. Both quarters grew slower than the 1.6% averaged in the previous four quarters. It appears the combination of slower lending growth and higher rent and mortgage bills is continuing to constrain household spending generally at present.

The highest spending annual spending growth during September was in Wairarapa (9.4%), followed by Hawke’s Bay (9.0%) and Marlborough (8.3%). The slowest regions were Southland (-2.5%), Nelson (+1.5%), West Coast (3.0%) and Waikato (3.1%).

ENDS

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