Four property market trends to focus on in 2022

PHOTO: NZ property. FILE

Press Release: Kalkine

Summary

The property prices have been moving out of control since the onset of the pandemic.
Real estate prices rose unevenly in 2021, with noticeable gains in suburban areas that were quite affordable in the past.
The mortgage lending structure within New Zealand could witness some major changes in the coming months.

Property buyers in New Zealand have been caught up in a unique journey, with housing prices spiralling out of control since the onset of the pandemic. Amid changing circumstances, the market is now subject to many new challenges like rising interest rates, tighter lending measures, and changing investor taxation restrictions.

These changes have redefined the property market outlook for 2022, preparing investors for yet another year of uncertainty. However, the property market seems to be better adjusted to survive any unprecedented challenges presented by varying economic conditions and the COVID-19 scenario.

While the property market has shaped up an unfavourable setting for first-time buyers over the last few months, a range of parameters is improving investors’ confidence. However, the situation may change soon as more properties are listed for sale, and customers are offered better prices for auctioned properties. On the flip side, the demand for property is unlikely to see a rapid decline anytime soon.

Amidst these ongoing developments, it is worthwhile to examine the trends that could define the growth trajectory of the property market over the coming months:

Growth in house price values

Interestingly, most suburbs across the country experienced a rise in prices throughout 2021, making the dream of owning a house distant for many. However, this growth in real estate prices has been uneven, to say the least. Big gains have been observed in the suburbs located in main centres. Even more noticeable have been gains in those suburban areas that were quite affordable in the past.

The recent report from CoreLogic suggests that the country recorded the highest gains in and around the regions of Whangārei, Waikato, Napier, Rolleston, and Tararua in 2021. Meanwhile, Lake Hayes saw the biggest gain in 2021, with a price jump of NZ$653,900. The report further highlighted that all 966 suburbs recorded a rise in property prices, with seven suburbs witnessing price gains of at least 40%.

Notably, over 690 suburbs saw a rise of at least 20% in property prices throughout the year. While property price rises are yet to take a breather, a potential rise in supply could foster a buyer-friendly atmosphere in the market.

An increase in housing stock

No doubt, the housing supply has been struggling to keep up with the rising demand for property. However, things might take a turn for the better, as the housing stock has been on the rise since late 2020.

The latest data from a popular real estate website suggests that properties were up for sale throughout December 2021 despite the implementation of mild restrictions in the country. The national housing stock increased by about 30% since December 2020 last month, with the market becoming more palatable for property seekers.

This is quite unusual as the buzz around the housing market generally dies down around December end and does not stay strong throughout the month. Surprisingly, the property market observed not only a rise in supply last month but also an increase in the range of property.

With more housing availability coming this year, buyers are expected to see a greater choice while finalising a property that best fits their interests. The latest findings have somehow strengthened buyers’ confidence for property listings in the new year, with the possibility of price falls in 2022.

An uptick in home loans

A perfect example of rising property demand is the booming mortgage lending industry in New Zealand. Mortgage lending has been growing at an increasing rate throughout 2021. According to CoreLogic reports, owner-occupiers have largely contributed to gains in mortgage lending. On the flip side, investors have taken a backseat, as their market involvement declined during the last year.

Meanwhile, the loan structure within the county has seen some significant changes, with one and two-year term loans being preferred over fixed loans with up to one year left to run. Moreover, CoreLogic predicts that increasing mortgage payments could weigh heavily on the overall economy in the months to come, eating up a larger proportion of household income.

Revision of lending regulations

Perhaps the most challenging situation facing the property market is a revision in the domestic lending regulations. The potential change in lending measures has arisen out of suspicion that existing lending regulations are being exploited by lenders. The New Zealand government has decided to review the existing practices conducted by banks, which has been pushing many buyers out of the market.

Consequently, a new law has been introduced to protect buyers who might be the victim of unfairly implemented lending restrictions. The main area under scrutiny is how banks determine consumer expenditure as discretionary and non-discretionary.

In a nutshell, buying a property in New Zealand has become nothing short of a well-planned task, given the meteoric rise in prices. As buyers walk through the uncertainties in the new year, multiple forces are likely to carve a new path for the real estate industry in the coming months. Overall, experts are hopeful that increasing property supply could dampen the ongoing price momentum despite strong demand.