At the end of November, for the first time since July 2019 the number of properties listed for sale in New Zealand was higher than a year earlier. The rise was only a small 2.4%, but that’s a long way from the likes of a 28% fall six month’s earlier and 18% fall in November 2020.
The slight rise results from new listing numbers after adjusting for seasonal factors rising for each of the past two months. This includes Auckland where the small 3% rise in total listings since November 2020 results from strong gains in new listings over October and November.
As yet the improvement in availability of property hasn’t altered the underlying pace of increases in prices nationwide or in Auckland. But when one considers the credit crunch underway and the sharp jump in borrowing costs, then allows for new house supply which often doesn’t make it into listings data, price growth is set to slow potentially sharply.
When that happens we’re going to see a number of people predicting big price declines – especially next year when a lot of Kiwis are likely to go to Australia and we talk of a brain drain. But be very wary of anyone who makes a strong statement regarding what is going to happen with prices – be they pessimistic or optimistic.
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The number of extraordinary factors which will determine where prices will go is greater than we have ever seen. Here are some of them about which we can only guess the impact. Put them together and the idea of forecasting price changes becomes ridiculous.
Mortgage rates have risen at their fastest pace since the early-1990s and are back largely at early-2019 levels. What impact will this sharpest jump in quarter of a century have on people’s willingness to borrow?
Credit availability is the worst since Rob Muldoon was Prime Minister. How quickly will people find ways around the constraints? House supply growth is the greatest since before Sir Rob became PM. Will this really flatten prices as so many people hope when building costs are rising at the fastest pace in decades?
Tony Alexander: “No one had a model which accurately predicted the surge in house prices as a result of Covid-19.” Photo / Fiona Goodall
Investors have been hit by the biggest shift in power to tenants ever seen and at the same time had their returns worsened by tax changes to a degree not seen in decades. Will this really dissuade people from buying and encourage selling? We haven’t the foggiest beyond the evidence so far of a reduction in buying plans overall since March 23 and a switch to purchasing new builds.
Central government is making the biggest power grab over council abilities to control their water and housing densities ever seen. Again, we can only guess at the impact on housing.
The unemployment rate is at an equal record modern-day low. Will this keep people highly interested in buying even though interest rates are high simply because they see a high probability of being able to service a large debt?
House prices on average have risen over 41% since March 2020. Is this jump locked in or will Prime Minister Jacinda Ardern get her wish that prices fall by 30%? One suspects the many first home buyers who have accounted for over 20% of home purchases since then would not be too happy about such a price collapse.
The country’s rate of inflation is at its highest level since the early-1980s excluding times when GST was increased. Will high inflation cause investors to shift more funds into assets which tend to do well when inflation is high – housing and shares – or will they grow fearful of high interest rates and switch the other way?
No one had a model which accurately predicted the surge in house prices as a result of Covid-19 and no one has a model able to take into account all of these many factors plus others discussed here this year. Be careful about reacting to strongly optimistic or pessimistic predictions about house price changes, and keep focussed on the long-term when considering your property buying and selling plans rather than getting caught up in whatever the next 12 to 24 months brings pricewise.
- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz
