During 2021, the housing market was dominated by consistent house price increases which saw the regional median sale price peak in Taranaki. As the year ended, prices were still on the rise with the latest Real Estate Institute figures showing Taranaki’s median price increased by 26.2% annually to a high of $626,100 in November 2021.
Also known as the year of the seller, 2021 experienced low levels of inventory as we saw fewer properties on the market. Demand for housing, especially for first home buyers and an increase in people moving to Taranaki, resulted in sellers gaining the upper hand. Before we look forward here’s a quick recap of where prices ended in 2021. Below is a regional breakdown of the township’s average property prices and how they compare with 2018’s figures.
All townships saw the average price of properties increase, Patea saw the largest percentage increase of 61.2% when compared to 2020. Oakura saw the smallest change but was still an impressive 14.8% increase from 2020. There is no hiding that house prices have increased significantly over the last 3 years. Take Eltham and Patea for example, both towns have surpassed a 100% increase from 2018 to 2021.
So what is in store for 2022? The big question is, are we going to see the same seller’s market continue into 2022 or will buyers take back the reins? Without a crystal ball, the answer is unclear, however, if the last three years are anything to go by, and with no signs of things slowing down just yet, 2022 is looking to be another strong year for selling.
According to an article from Stuff where they look at what lies ahead for the NZ housing market, CoreLogic chief property economist Kelvin Davidson says the market has started to slow and there are a few key reasons why. These include affordability challenges, rising mortgage rates, a tighter lending environment, and an increase in listings. Reinforcing this idea of a cooling market are the Reserve Bank’s own predictions. The Treasury expects property prices to increase by 10.4% in 2022, a much smaller rise than we’ve witnessed in recent years.
So what are some key considerations to be aware of when it comes to selling your home? Below we break down the four key factors which can affect house prices, including housing supply, affordability, interest rates, and the lending environment.
One of the key attributes to a seller’s market is a low inventory of houses available to purchase. In the post-lockdown housing market boom, house prices skyrocketed and a lack of houses on the market was often cited as one of the main causes. According to REINZ Monthly Property Report for December, the tail end of 2021 saw an uplift in inventory levels, November was up 2.3% annually, and overall the number of listings in 2021 declined by 1.7% when compared to 2020.
It is a little too early to predict whether or not more properties will come on the market as property owners cash up on high house prices. But with a growing number of first home buyers still trying to get onto the market, and with an increase of out of town buyers year on year, demand looks to continue outweighing supply.
For example, when reviewing our statistics for 2021 McDonald Real Estate saw 25% of sales within the company go to out of towners. This was up from 22% in 2020 and 21% in 2019, showing us that more out of towners are cashing up and making their way to our region every year.
Rising prices often fuel the fire of low housing stock. While selling a home nets you significant gains when values are this high it’s also tricky to buy into this market. This means that single property households often hold off until they can afford a house to move into.
When you look at the average price of houses in New Zealand, Taranaki is the most affordable region in the North Island with a median house price of $626,100, this is significantly lower than the national median of $925,000, meaning Taranaki has been considered an affordable place to purchase a property. As out of town buyers continue to increase, bringing with them higher offers, we expect to see house prices continue to rise. This is the perfect storm for those looking to downsize their property or free up cash but can prove challenging for people looking to buy their first home.
The price of homes has been significantly inflated due to the availability of cheap loans and historically low-interest rates. However, with the Reserve Bank increasing interest rates and tightening mortgage borrowing conditions, this is forecasted to change. In August 2021, the average two-year mortgage rate for new borrowers was 3.69%, Reserve Bank data shows. By November, that had risen to 4.65%. The increasing interest rates will drive up the cost of servicing a mortgage and reduce the amount households can borrow, in return cooling down housing demand.
Many buyers are aware that they could afford a large mortgage at the current rates, but what if they were to double, or triple over the coming years? Over-extended buyers may be forced to sell and will be less picky about getting maximum value for their home if their motivation is to escape financial pressure. This would correct many of the factors influencing the current upward trend.
Not only are interest rates on the rise, but credit availability has also gotten tougher. Loan-to-value ratios have returned, new Credit Contracts and Consumer Finance Act rules (which make accessing lending harder) are in place, and the Reserve Bank is consulting on debt-to-income ratios. With constraints like this weighing on borrower applications, it's not only first home buyers that are finding it tough. Even borrowers with healthy deposits and equity are getting knocked back as their bank statements are being put under the microscope.
According to feedback from an October survey of 60 nationwide mortgage advisers indicated that while banks continue to lend money, their assessments of how much money can be borrowed are becoming tougher. That includes how they view income, expenses, spare monthly cash - and deposit size.
The good news is that economists are predicting that the credit crunch should ease off in 2022 as banks learn how to handle and adapt to the new rules, which will give more borrowers the opportunity to get back in the market.
It's hard to anticipate what will happen in the market for 2022. While the equity surge of the past year looks good on paper for existing homeowners, it isn’t much use when you can’t move. However, conditions look set to become more favourable for those looking to make a change, allowing families who wanted to buy new homes this year to get their wishes fulfilled.
As the government is trying to get a handle on increasing house prices, banks and lending institutions are adapting. With ongoing changes happening more frequently than we would like to see, it is always smart to keep on top of the market. Luckily, our sales team are keeping on top of market changes and future predictions, so if you are looking for advice when it comes to selling your home, our team can help.
By booking an appraisal a salesperson will visit your home before presenting a current market valuation. If you had a valuation in 2021 chances are it could be quite different as the market changes rapidly. Why not book in for a follow-up appraisal and see whether your property is worth less or more. This appraisal will take into account the current market and recent sales in your area. The sales representative will also outline the pros and cons of selling in the current market. If you would like to book a free no-obligation appraisal don’t hesitate to get in touch.