What lies ahead for NZ property buyers in 2022?

As 2022 approaches, the industry is trying to figure out what lies ahead for the New Zealand property market and property buyers – and it seems CoreLogic New Zealand (CoreLogic) has a positive outlook.

This year, the tight supply of listings on the property market has been one of the factors pushing prices up sharply, with the lack of choice leading to fear of missing out (FOMO), putting the power into the hands of property sellers, according to CoreLogic.

A joint survey in November by economist Tony Alexander and the Real Estate Institute of New Zealand (REINZ) reflected the results of CoreLogic’s report, noting signs of reduced buyer demand – with a net 46% of respondents having seen fewer people at auctions and a net 61% having seen a decline in open home visits.

However, over the past few months, CoreLogic noticed that the total stock of listings on the market had become much clearer as new flows have recovered and achieved sales have dipped.

“Indeed, since the recent trough, the total stock of listings has risen by almost 40% and is now back up to the highest level since March. To be fair, that’s still a low level. But the gap to where they were at the same time in previous years is nevertheless steadily closing. It’s conceivable that by the end [of] the year, listings will have recovered to where they were (or even above) at the end of 2020,” said Kelvin Davidson, chief property economist at CoreLogic.

“The turnaround for total listings isn’t a universal trend (yet), but is certainly very clear to see in some of the main centres – notably Dunedin and Wellington (and to a lesser extent in Hamilton), where listings are now back above the levels that prevailed at the same time in 2019 and 2020.”

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CoreLogic has also noticed signs of faltering property values in Dunedin in recent months, bringing more choices for buyers and showing evidence of softer price pressures. And despite some areas remaining tight, CoreLogic economists expect to see more listings in 2022 as new sellers come forward and sales activity itself tails off further.

“Of course, it may not necessarily become a ‘buyer’s market’ overnight, because, of course, some vendors may be stubborn in sticking to their price expectations, which if they aren’t met could just see listings sit for longer and/or be withdrawn altogether – especially since unemployment is low and few vendors are likely to be ‘motivated sellers’ at present,” Davidson said.

However, as mortgage rates continue to rise and credit conditions tighten, CoreLogic economists said some property sellers might eventually cave in and “meet the market.”

“Certainly, any official imposition of debt to income ratios may force some investors who are wanting to buy extra properties to sell more of their existing portfolio in order to stay under the cap – unless, of course, they look at new-builds, which may well have favourable treatment under any DTI system,” Davidson said.

Overall, CoreLogic economists expect 2022 to see a “buyer’s market” for the first time in a few years.

“To be fair, it’s important to note that a reduction in vendors’ power may not necessarily equate to outright falls in house prices. But even so, although buyers will have to work pretty hard to get the finance in the first place, they have reasons to be optimistic about getting a ‘bargain’ next year,” Davidson said.