It’s clear that 2021 has been the ‘year of property politics’, but most thoughts now start to turn to 2022 and how the market might shape up next year. Our hunch is that we might finally see a ‘buyer’s market’ emerge, but it may still take some time. There are four key factors to keep an eye on.
First, we’ll be watching for the effects of further lending regulation. It looks relatively likely that the RBNZ will impose a floor on serviceability interest rates from about the middle of 2022 before they potentially sub those out for formal caps on debt to income ratios (DTIs) at the end of 2022. It’s up for grabs about where those caps are set – e.g. they previously indicated it could be six for investors and seven for owner-occupiers, but the latest consultation documents hinted that a flat rate (perhaps seven) for all might be more likely. It’s also conceivable that any introduction of formal DTIs could also see the LVR rules relaxed a bit. But whatever the final details, it seems likely that DTIs would be more of a concern for investors than other borrower groups – although new builds are likely to remain a target for both.
But there’s still a chance DTIs won’t actually be required. After all, our second factor to watch is rising mortgage rates, as the RBNZ continues to push through a series of cash rate increases next year. This is a factor that could easily slow the property market well before we get to the end of next year, especially since about 70% of existing mortgages are either floating or fixed for a short period – meaning they’ll feel the brunt of higher mortgage costs relatively quickly.
Third, and on top of rising...
