House prices rose dramatically across the country last year with new data released yesterday showing 27.6% growth in the market.
According to CoreLogic, the rate surpassed the previous record of 24.4% recorded in 2003.
However, as the latest house price index shows prices are still warm, signs of a slowdown are looming on the horizon.
CoreLogic’s chief research officer Nick Goodall said that despite sharp monthly value increases, the annual growth rate fell for the second month in a row in December after peaking at 28.8% – illustrating that nothing can grow forever.
“It doesn’t happen quickly, but we expect it to continue throughout the year.
“We know that with the level of prices they are at, the increase in interest rates, the tightening of bank credit, we think that is going to have an impact on the level of demand.”
Goodall said there are more properties available for sale today than at any time in the past two years, which will reduce the pressure on prices.
The key question is whether buyers will see the prices drop, he said.
“Without a combined rise in unemployment where people are unable to pay their mortgages, we don’t necessarily expect prices to come down but a slower rate of growth, before the end of the year when things might go downhill. flatten it a bit. “
2021 also left the country with an average home value exceeding $ 1 million to now sit at $ 1,006,632.
Auckland is the most expensive place to buy with an average price of $ 1.42 million, followed closely by Tauranga and Wellington who also have six-digit averages: at 1,139,186 and 1,125,729 respectively.
Goodall said that in the provincial centers there is still a wide range of real estate values.
“In each of these markets, there will always be properties that are in the $ 400,000 mark, which is still relatively affordable for first-time home buyers.
“Of course you have to have a job in these places if you are looking to move there and that is the key question: can you make a living in these places if you choose to go and buy a property.”
Prediction of an exodus abroad affecting the market
Independent economist Tony Alexander said one of the reasons house prices have gone up is that people are doing things backwards – first by buying a house, then by doing their OE.
He believes one of the biggest changes 2022 will bring is the number of first-time homebuyers moving overseas.
“Many of them, quite frankly, will likely look to Australia for the high wages, the falling house prices, the lower cost of living and the opportunities available there.
“This will help calm the housing market further this year.”
Alexander said that while there will be an appeasement, he doesn’t think prices will return to pre-pandemic rates.
He is no longer considering government policies to discourage real estate investors.
“The fact that we are starting to see signs of a market slowdown and certainly a big pullback from first-time home buyers as well as investors, I would say there is not much of a chance that the government will put it into effect. new severe measures to radically affect the housing market. “
Tauranga real estate investor Lindsay Richards said it was difficult for anyone looking to buy a home in the current market and certainly not easier for an investor.
He said the average value of a house in Tauranga could be skewed by wealthier areas, such as Mount Maunganui.
“These prices can of course be distorted by one or two real estate sales, which can give the temporary impression that house prices are going up.
“But for one house, to be a laudable proposition, those numbers just wouldn’t stack up.”
Richards said progress will be slow to see change, but predicts that in two years there will be a lack of demand from people moving overseas, which will provide a housing glut.
However, he cannot see house prices going down in the near future.