Are things finally slowing down?
Century 21 New Zealand owner Tim Kearins said the real estate industry took a hit from the lending restrictions that came into effect in November and December, emphasising the Real Estate Institute of New Zealand’s (REINZ) latest monthly statistics.
REINZ’s December 2021 sales data found that median housing prices increased annually by 21.5%, from $745,000 in December 2020 to $905,000 last month. However, even with the year-on-year growth, the report noted that the latest figure was a 1.6% decrease compared to a solid November 2021.
REINZ chief executive Jen Baird said the December 2021 sales data was a “solid close to a strong year for the New Zealand property market,” with demand and sales activity that remained firm and an increase in new listings through November and into December.
However, Baird noted a deceleration in annual price growth last month compared to previous months. Additionally, while the market remained confident, the impacts of rising interest rates, tighter lending criteria, and changes to investor taxation restrictions are starting to manifest.
Kearins agreed, emphasising that first-home buyers (FHBs) are bearing the brunt of the recent changes.
“The reality is only a handful of first-home buyers are now allowed to borrow more than 80%, so most are falling well short with their deposit. On top of that, significantly fewer mortgage applications are being approved because banks now need to conduct ultra-conservative assessments on all new borrowers,” he said in a statement.
Read more: Leader calls for Finance Committee to rethink changes to CCCFA
Since November, the Reserve Bank of New Zealand’s (RBNZ) restrictions have meant banks can only lend 10% of their new lending to owner-occupiers wanting to borrow more than 80% of a house’s value.
Meanwhile, the changes to the Credit Contract & Consumer Finance Act (CCCFA) that took effect in December led to criticism from the banking and mortgage industries that too many new home loans were being declined unnecessarily.
Baird revealed that feedback from several regions noted a falloff in buyer numbers – particularly first-time buyers – due to the amendments.
“Over 2022, the impact of these changes and anticipation of further interest rate increases are likely to play out in the market, leading to a gradual slowdown in the pace of price growth,” Baird continued.
Kearins added: “I’m pleased the government has asked the financial regulators to bring forward their investigation as to whether the CCCFA is being [implemented] as intended. Unfortunately, how it’s currently being applied is not only hurting first-home buyers but [also] next-home buyers with an exemplary repayment history.”
He said the latest REINZ statistics will be a wake-up call for the government and the RBNZ, warning that “if they continue to tighten the screws too hard, the very people they’re trying to protect will be the ones most adversely affected.”
