More signs of a cooldown in country’s hot housing market – expert


House prices rose dramatically high across the country last year with new data released yesterday showing a 27.6 percent growth across the market.

Houses around Lyttelton area in Christchurch

Higher interest rates and tighter credit are among factors affecting demand for houses, an expert says. Photo: RNZ / Nate McKinnon

According to CoreLogic, the rate exceeded the previous record of 24.4 percent seen in 2003.

However, while the latest house price index shows the prices are still hot, signs of a cooldown are on the horizon.

CoreLogic head of research Nick Goodall said despite strong monthly value increases, the annual rate of growth dropped for the second month in a row in December after peaking at 28.8 percent – illustrating nothing can grow forever.

“It’s not happening quickly but we do expect that to continue throughout the year.

“We know that with the level of prices they are at, increasing interest rates, credit tightening up from the banks, we do think that is going to impact the level of demand.”

Goodall said there are more properties available for sale today than at any time in the last two years which will reduce pressure on prices.

The key question is whether buyers will see prices drop, he said.

“Without a combined increase in unemployment where people are unable to pay their mortgages we’re not expecting a drop in prices necessarily but a slower rate of growth, before the end of the year where things might flatten out a bit.”

2021 also left the country with an average value of homes exceeding one million dollars to now sit at $1,006,632.

Auckland is the most expensive place to buy with the average price at $1.42m, closely followed by Tauranga and Wellington which also have six-figure averages: at $1,139,186 and $1,125,729 respectively.

Goodall said in the provincial centres there is still a wide range of property value.

“Within each of these markets there’s still going to be properties that are in that $400,000 mark which is still relatively accessible for first home buyers.

“Of course, you need to have a job in those places if you are looking to move there and that is the key question: can you sustain a living in those places if you do choose to go and buy a property.”

Prediction of exodus overseas affecting market

Independent economist Tony Alexander said one of the reasons house prices had risen were people doing things backwards – first buying a home, then doing their OE.

He believes one of the biggest changes 2022 will bring is the number of first home buyers moving overseas.

“A lot of them, quite frankly are likely to be looking over to Australia for the strong high level of wages, lower house prices, and lower cost of living and the opportunities available over there.

“That will feed into some extra calming of the housing market this year.”

Melbourne, Australia - October 11, 2015: Row of new, modern suburban houses on the hill in Melbourne with trees during daytime.

Lower house prices will be among reasons first home buyers will move to Australia, economist Tony Alexander says. Photo: 123RF

Alexander said while there will be a calming he does not believe prices will go back to pre-pandemic rates.

He does not envisage any more government policies to discourage property investors.

“The fact that we are starting to see signs of the market slowly easing off and certainly a big stepping back by the first home buyers as well as the investors, I would say there’s not much chance of the government going to bring in place some new harsh measures to radically affect the housing market.”

Tauranga property investor Lindsay Richards said it was hard for anyone looking to buy a home in the current market and certainly no easier for an investor.

He said the average value for a home in Tauranga could be skewed by more affluent areas, such as Mount Maunganui.

“Those prices can of course be skewed by one or two property sales which can give a temporary appearance that house prices are going up.

“But for a single house, to be a rentable proposition, those numbers just wouldn’t stack.”

Richards said it would be slow progress to see any changes but predicts in two years, there will be a lack in demand from people moving overseas so that will provide a glut of housing.

However, he cannot see house prices dropping in the near future.

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