The 2022 Property Market – how’s it going so far and how turbulent could it get?

After a quite extraordinary 2021, during which average property prices increased by close to 30%, we are already seeing some quite obvious changes in the market and we haven’t even got to Easter yet.
With limited space available here, I’d like to briefly note the main factors at play right now – both positive and negative – and then finish with a ‘best guess’ prediction for the market over the next 12 months:

  • After a very well advertised listings shortage late last year we have been seeing many more properties coming onto the market for sale over the last couple of months. This has given buyers a greatly increased choice, removing the need for panic buying, which has contributed to very quickly removing significant heat out of the market.
  • Demand and supply are heading towards an equilibrium where we have a much more settled market (and potentially moving closer to a buyers market in the medium term!).
  • Inflation in NZ is now the highest it’s been for 30 years (5.9%) – as a result of this, and some other factors, there are likely to be at least 6 Interest rate increases between now and mid 2023  – signalling that home loan payments will continue to increase.
  • New bank lending rules were tightened for first home buyers at the beginning of the year causing many to have their pre-approved loan amounts reduced or even cancelled. The rules that caused a lot of these problems for first home buyer lending have now been relaxed but the fall in home loan applications has not yet recovered.
  • Once again, a shortage of rental property is creating strong competition and causing rents to start rising sharply.
  • As you’ll see in the news, building materials are still in short supply – and prices are up 16% in the last year. And this is on top of the increased price of sections.

What does this all mean?
Well, ANZ Bank has already stated that property prices may fall by up to 7% in 2022.
However, the Treasury have forecast a 10% rise in prices over the same period!
So, all that we can be certain about is that the future is uncertain.
Now, here are a few reasons why the market could remain competitive:

  • When our borders fully re-open there are upwards of 30,000 Kiwis waiting to come home – many bringing strong foreign currency and wanting to buy property here.
  • There are still plenty of domestic buyers in the market right now who are continuing to create strong competition for well-marketed homes.
  • Whilst Auctions and Deadline Sales are now clearing at reduced levels, with fewer bidders, we should start to see the re-emergence of priced listings with no set date of sale. Imagine that!
  • Building consents are also still high showing continued confidence in building new.

Regarding the changes in the bank lending rules I mentioned above, we recommend first home buyers talk with a mortgage broker first before they go to the bank. Having someone in your corner that can help you to navigate the rules before you present an application to the bank can save you both time and stress.
Finally, as promised, here is my ‘best guess’ prediction for the rest of this year.  In what will certainly be an interesting 8 months, I believe we will see the market and prices level out and become more ‘normal’.
Home loan rates will certainly rise but, compared to previous market cycles, money will still be relatively cheap.
All this means that we are already moving from a sellers market to a more even and steady market where both buyers and sellers have time to breathe and make informed decisions.
However, a buyers market may still be at least 6 months to a year away.