Feature article

What's in store for the NZ property market in 2022?

Insights from CoreLogic's Kelvin Davidson, economist Tony Alexander, First Home Buyers Club Spokesperson, and more.

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With the property market showing signs of slowing, is hope on the horizon for buyers across the country?

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10 key insights from the report

1. Interest rates set to rise

According to CoreLogic chief property economist, Kelvin Davidson, politics and regulation have had a big effect on the housing market in 2021 from extending the brightline test for existing properties, giving the RBNZ powers to use lending restrictions such as caps on debt to income ratio,

Indications from the Reserve Bank are that the OCR will peak at 2.5% by mid-2023, says Kelvin. This would take a standard mortgage from 4 or 4.5% to 5 or 5.5%, with some mortgage holders seeing 6%.

2. Securing finance set to become harder

One of the biggest influences on the progress of the housing market was a credit crunch in the latter part of the year brought about by a combination of loan to value restrictions, talk of debt to income caps, and the sixth-fastest increase in rates since the early 1990s.

At the same time, conditions changed markedly for investors when they could no longer deduct interest expenses on their existing properties. First home buyers surged in but their ability to act got tougher later in the year when lenders were pickier about their lending criteria.

3. Is a price correction on the horizon?

In some locations, such as the regions, prices could easily fall, says Independent Economist Tony Alexander. In Auckland it’s flattening out, Wellington could go down, and Christchurch is still playing catch up, he says.

Meanwhile, as listings increase, people will be losing their fear that they won’t find something to buy. March will be the busiest month, with healthy listing volumes and the message to first home buyers is to be active in the market, says the economist.

4. Signs of slowing

All in all, as 2021 came to a close, the competition was less fierce, prices started to stabilise and buyers felt confident they weren’t overpaying.

“There’s no doubt that there’s change happening in the marketplace but it’s orderly. This isn’t a bad thing, ultimately, for prices to slow,” says head of Wellington agency, Lowe & Co, Craig Lowe

My feeling is things will stabilise at a more typical turnover point sometime this year so it’ll be more like a 2015 market than a 2021 one, he says.

5. The market is still resilient

Median prices took off in October and November, REINZ data reporting a jump of $130,000 in just two months. This showed the resilience of the current property market upturn.

The biggest risk is that the RBNZ has gone in too hard and too fast and that a consequence is declining consumer confidence, says Ray White chief economist Nerida Conisbee.

6. Buyer confidence remains high

People are more confident to put their homes on the market, which is totally predictable and buyers are having more choice, says Harcourts managing director, Bryan Thomson.

Prices won’t continue to the extremes of 2022 but says he would struggle to say it’s a buyers’ market yet. Based on more listings, there will be greater choice but warns the best properties are always sought after.

What can first home buyers expect from 2022?

The 2021 housing boom means first home buyers will need to save an additional $35k for a 20% deposit when compared with this time last year. That’s a deposit of $187,220 for the national average asking price and a whopping $250,000 for the Auckland average asking price.

7. Increasing barriers to ownership

First home buyers can expect stringent bank criteria in 2022, with the biggest barrier to homeownership being getting the funds together, says CoreLogic chief economist Kelvin Davidson.

First home buyers have strongly stepped back, says Tony. The FOMO gauge from prospective buyers has fallen to a level not seen since April 2021 when the country was in its first nationwide lockdown and house prices were widely expected to decline.

8. Crackdown on lending

First home buyers’ ability to show their strong saving pattern is extremely important now and into 2022. Loan Markets mortgage adviser, Cameron Marcroft, says if you’re frugal you’ll be okay.

The advice he and his team give first home buyers is to get together three months of bank statements to show their spending habits over an average of this chunk of time.

8. Only going to get tougher

“We’ve seen things tighten and tighten in 2021. In certain areas, house price values doubled, and that’s massive in terms of people saving for a deposit and trying to get lending approved,” says First Home Buyers Club Spokesperson, Lesley Harris.

The saving grace, until recently, has been very low-interest rates, but they’re now rising. As they climb, there’s less lending that the banks deem you can service. None of this is getting easier, she says. 

9. Government support doesn’t go far enough

The First Home Buyers Club spokesperson would like to see good affordable housing, assistance with the deposit, and a refreshment of the HomeStart Grant. In Auckland, you can only get the grant if the home is valued under $700,000.

At the moment, 5% to 10% of first home buyers are eligible for that grant, says Lesley. You want this to be 95%, she argues.

10. Regional breakdown

Every region in the country reached a record average asking price. Due to historically low prices, Manawatū-Whanganui and Hawke’s Bay experienced more year-on-year growth than any other region in New Zealand.

Our major cities reached record-breaking prices, most notably the Wellington and Auckland markets. 

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Experts discuss the current state of Aotearoa’s property market and what Kiwis can expect in the year ahead.
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