Hot - but for how much longer?

New Zealand’s heated housing market will likely cool on the back of interest rate rises and open borders, property market experts have predicted.

Speaking on OneRoof’s Property Report panel today, economist Tony Alexander said that the housing market would slow once the restrictions on international travel were lifted.

“One reason the housing market is so strong everywhere on the planet at the moment is because people can’t travel and they were going to travel, splurge and then buy house. But when they can go back to travel, they’ll put the house at the end of the queue again,” he said.

Alexander said interest would likely rise by the end of the year, although he noted that some major banks had indicated lifting rates in the coming weeks.

“I don’t think we are going to get an interest rates shock. However, because the buyers are so used to low interest rates, when they go up it could cause a strong reaction from the buyers,” he said.

Fellow panellist Rupert Gough, founder of Mortgage Lab, said that when interest rates do go up it would be significantly harder to get a mortgage.

He said that while 2.5% rise did not seem a lot but it would mean mortgage holders would be paying back double what they are now. “I think in three or four years there will be a lot of face palming from people who wished they paid their mortgage at 2.3%,” he said.

The panel event was moved online as result of the alert level three restrictions in Auckland, also saw contributions from Real Estate Institute of New Zealand CEO Bindi Norwell and Carmen Vicelich, CEO of OneRoof’s data partner, Valocity.

Norwell noted that the post-Covid boom had put upwards pressure on prices in suburbs that had been previously seen as affordable and within reach of first home buyers.

“There are still some affordable pockets [in Auckland] but people may have to think a bit further afield than they traditional would have, but as long as there are good transport links, there are some good opportunities,” she said.

Vicelich said New Zealand was lucky to have an on-going growth in the property market, even in tourism towns, which had experts worried when the pandemic hit the country last year.

“Even in Queenstown the property has gone up 15% since March last year but it [lockdown] is not something that’s economically sustainable and will bit us in the long term,” she said.