The Reserve Bank’s restrictions on lending to borrowers who have deposits less than 20% have already caused banks to “pause” low-deposit loan requests. Willis is concerned that first-time home buyers will be the worst affected. Fiveteen regions had record-high asking prices in February 2022, compared to February 211. The largest monthly increase was at 8 percent in Central Otago/Lakes where the average asking price was $1.33m.
Our latest Buyer Classification figures highlight an emerging ‘debt vs equity’ split in the market, with mortgaged investors and first home buyers seeing low/falling shares of property purchases, but cash investors and movers having a rising presence. Average asking prices reached all-time highs last month in five of our 19 regions, with Northland and Bay of Plenty reaching record highs for the second consecutive month. Theoretically, if there were no new listings in the Wellington region, and all stock was sold out, there would not be any houses for sale in 17 weeks, which is longer than the average long-term. However, the number of new listings added to our property site in March was down in 10 of our 19 areas compared to last year. The data suggests that vendors opted to list less often in March 2021 than they did in March 2021. This could be due to COVID-19 uncertainty and inflation uncertainty.
Following hints of a cooling market in February 2022, real-time data from realestate.co.nz shows that Wellington became a buyers’ market in March 2022, while Auckland might soon follow our trendsetting capital. One of the policy changes have the biggest impact on the housing market in 2022 is largely out of the Government’s hands. But this is now tipped to change with the Reserve Bank slowly increasing interest rates and tightening conditions for mortgage lending, and the Government cracking down on investors and risky borrowing.
This is because investors may start to list their properties on the marketplace. Prices in investor-driven areas, especially those in the central and lower North Island could drop. However, auction activity is reported to be cooling with fewer bidders and attendees and more auctions being completed. Expert consensus was that the market was at its peak and that price increases would slow down. It stated that “tweaking Credit Contracts or Consumer Finance Act changes will not rescue the market from future prices falls”. She said that the increase in properties available and the subdued market are having a depressing effect on sales activity. “Property owners are under increasing pressure. The cost of living is rising rapidly, pay rates aren’t keeping up, mortgage interest payments are rising, and the house is no longer doing the saving for them,” Gordon said.
Read more about Denise Wong here. “Unfortunately, it’s first-home buyers who are bearing the brunt of it,” he said of the Government’s lending restrictions that took effect in December – restrictions that were intended to keep loan sharks and predatory lenders at bay. There is some hope on the horizon for hopeful home-buyers, with the Real Estate Institute observing the start of “a gradual slowdown in the pace of price growth”. The median asking price for housing and rental properties is high, but it must be considered in the context of low inventory. “Most important, we believe, fixed-term mortgage interest rates have risen sharply in September in anticipation of the OCR hikes the Reserve Bank will deliver over the next couple of years.
The Government’s focus shifted to finding new ways for first-home buyers to be helped, such as progressive homeownership. This has led to 53 new households. The Government has also allocated $3.8 billion for housing infrastructure and those tier 1 councils have To be eligible, you must deliver at least 200 homes. In a rare display bipartisanship, Labour & National announced in October a law change to accelerate the process of requiring councils to allow more apartment blocks in the largest cities in New Zealand.
“Reports also indicate less investors are looking to purchase and more inclined to sell due to the disincentives imposed in 2021, potentially adding more stock on the market,” Mr Ngarimu added. Housing crisis and economic impact of Covid-19 has led to an increase in homelessness and increased inequality. Everybody seems to take a deep breathe when April rolls around. The market follows suit. We also have two major disruptions, Easter and school holidays, to further distract everyone. So, in summary, a normal April will typically involve fewer sales than February or March. As Kiwi businesses and consumers are left to grapple with a nasty cocktail of inflation and higher interest rates, there will be a raft of implications for our economy.
The government can still reduce the hot property market by introducing reforms that specifically assist first-time buyers, since comprehensive reforms seem to do little to help this group of buyers. One can say that buyers who do not require any lending to buy a property have been significantly better off than those depending on mortgages. Thus, wealthy investors and buyers, who are likely in possession of the property, have been able to retain their market share despite lending restrictions. Experts are hopeful that the decline in the share of first-home purchases may remain a long-term trend in the given situation.