PHOTO: Property Crash. FILE
In its recent economic survey, the Organisation of Economic Cooperation and Development (OECD) stated that the New Zealand economy is now overheating. Prices have reached insurmountable levels across all industries in the country, with the real estate market being the biggest testament of inflation. The stimulus infused environment has pushed housing prices to new highs amid strong demand and subdued supply.
These elevated price levels remain a threat to first-time homebuyers and potential sellers in the property market. As the economy corrects itself to the pre-pandemic state, housing prices are expected to follow suit and reach more palatable levels. However, the major concern pertains to prices crashing down to unpleasant lows. Fear of a property market crash is looming due to rising interest rates, easing housing shortage and stricter prudential policies.
Notably, falling prices can land more gracefully if affordability improves across the economy. With COVID relief measures being slowly withdrawn out of the economy, affordability concerns might widen in the housing sector. Meanwhile, reintroducing stimulatory measures can be of less help as the economy already seems overheated.
SOURCE: Kalkine
Property Noise NZ HIGHLIGHT THE ISSUES FACING THE PROPERTY MARKET in 2022
1/ The OCR (Official Cash Rate) will lift in meaning higher mortgage rates
2/ Increased inflation effecting how much homebuyers can afford and thus can borrow from the banks
3/ House prices are simply too high for landlords to keep buying (40% deposit) and First Home Buyers (20% deposit) to afford at 2021 levels
4/ New build house prices will rise significantly – due to inflation and supply change issues, which will have an effect on demand pressure
5/ FOMO (Fear of Missing Out) – has gone from the market and no longer is the key driver like it was in 2021
