Real estate must surely rate as the most talked about topic in all forms of the media and in recent times there has been plenty to talk about. We have witnessed prices escalating at unprecedented rates in a market fuelled by cheap finance, an under supply of stock and a banking system that has been shovelling out mortgage finance with abandon. An overview of the market suggests that many ordinary homeowners have more than doubled the equity in their family homes in the last two years; a great market for those already on the gravy train but very costly and difficult for first home buyers.
In their December 2021 news release, the Real Estate Institute of NZ (REINZ) stated “Property prices climbed further in November, early signs suggest price growth will continue though more moderately. Across New Zealand, there was an annual increase of 23.8% in median prices.” This trend of prices climbing at a quicker rate than first home buyers could save and keep pace with was destined to come to an end and Tommy’s sees signs that perhaps that time has arrived. There are a number of indicators that tell us that a market change could be with us.
December is always a tricky month to use as a yardstick for market activity as many buyers and sellers are focusing on holidays, family time and the Christmas/New Year close down. This summer there has been an additional incentive to prioritise holidays following the intervention of lockdowns and other Covid compliance issues dominating our lives in 2021. This has undoubtedly influenced the priority list of some homeowners and potential home buyers. Most of us have been more than ready to devote our attention to December/January holidays and this has had an impact on buyer/seller activity.
From our observations, the December market was flat by comparison with previous months due in part to Covid but also to a change in bank lending policies with home buyers’ financial status coming in for far greater scrutiny when loan applications were being considered. These policy changes can be attributed to changes to the consumer finance laws and in particular to amendments to the Credit Contracts and Consumer Finance Act 2003. The main purpose of this Act is to protect the interests of consumers in connection with credit contracts and in particular as far as the housing industry is concerned, to protect borrowers of mortgage finance.
Prospective borrowers are now being asked to provide considerably more detail of their income and expenditure history and other financial commitments before being granted mortgage finance. Whilst Tommy’s agrees that consumer protection is a worthy focus, the sudden policy change we have witnessed has caught some home buyers short and has undoubtedly contributed to a slowing of the market and an increase in the number of properties on the market for sale.
Looking ahead, we offer the following observations for how we see the immediate short-term future.
- As the year 2021 came to an end, open home attendances dropped away. Again, this can in part be attributed to the impending festive season close down but it can also be an indication that some heat has gone out of the market. Open home activity from mid- January onwards will be watched with interest and will give a clearer picture of what our 2022 market activity will look like. Our expectations are that the market will regain some traction from mid- January.
- The market as we have known it in the last two years has produced multiple offers on many properties sold by tender, auction or private treaty. This feature of the 2021 market was not so apparent as the year came to an end.
- The number of properties listed for sale has increased offering greater buyer selection. From a vendor’s point of view, more competition seems inevitable creating a need for a comprehensive marketing package and the services of an experienced agency to represent you in presenting your property and in the negotiating process.
ADVICE TO HOME SELLERS: Despite these market indicators telling us that there may be some reduction in buyer activity in 2022, Tommy’s remains confident that the resilient Wellington market will continue to deliver good results for home sellers. There may be a “levelling off” in the spiralling house prices but we don’t foresee any dramatic decrease in values. With finance being more difficult to secure, houses may take longer to sell, and it would be prudent to take this into account when planning your sale. It is likely that your agent may suggest a slightly longer agency term than was required last year.
ADVICE TO HOME BUYERS: There is definitely a greater selection of property available for sale now than has been available in recent months. Get your finance approved, make a competitive offer and good luck. It won’t be any easier this year, but home ownership is worth striving for and will give you security of tenure and also an opportunity to reap capital gains over a period of time.