Data from December shows fewer home buyers and more sellers, it could be the start of slowdown or just a Christmas speed bump, Justin Giovannetti writes.
The beginning of the end of the great house price boom? Some real estate experts are warning that prices in the country’s superheated housing market are starting to plateau after a record-breaking year. Similar predictions have been made in recent years—less than two years ago many were warning of a monumental crash—only for records to continue toppling over. This time they say it’s different. The head of the Real Estate Institute of NZ told Newshub that with interest rates climbing, lending criteria tightening and tax changes hitting investors, growing “headwinds” mean buyers are falling out of the market.
It could be a perfect storm hitting the country’s housing sector. For all those issues, there’s also the recent changes to the country’s credit rules, which have hammered first-time buyers. Experts warned RNZ that it’s now nearly impossible to secure a mortgage with a less than 20% deposit. A different rule change by the Reserve Bank last year means that only 10% of bank lending can now go to those with less than 20% deposits, which presents a de facto cap on first-time buyers. As The Bulletin reported earlier this week, some banks have begun cancelling pre-approved mortgages because of borrowers’ Christmas shopping at Kmart or habit of visiting parents on weekends.
New Zealand’s runaway housing market, already one of the world’s most expensive, soared in 2021. According to CoreLogic, the average price of a house in New Zealand hit $1,006,632 in 2021, after a record-breaking annual increase of 27.4%. Anecdotal suggestions from real estate agents that buyers have stopped showing up at auctions in recent weeks is somewhat backed up by new data released yesterday. As BusinessDesk reports, sales fell 29.4% in December over the previous year, while the number of available properties increased by 28.7%. In the last month of 2021, 6,755 properties sold while 16,773 were listed. Despite the fewer buyers and many sellers, prices were still up sharply over the previous year.
Suburbs in Auckland, Wellington and Queenstown have now crossed the $2-million mark. The search for affordability has driven some people to not only buy homes sight unseen, but also in cities they’ve never visited before. The Southland Times reports on recent arrivals in Invercargill attracted by the relative affordability of the market, with homes still selling for around $455,000. The cheaper housing makes securing a deposit easier, especially at a time of growing prices across the economy. To help drive down prices in 2022, Newsroom’s Sam Sachdeva writes that the government could consider delaying big-ticket infrastructure projects to take the pressure off a construction industry cracking due to labour and material shortages.
So is the housing market actually slowing down? There’s early indications it might be, but New Zealand house prices have had a way of defying expectations in recent years.
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