Very few analysts or commentators – in reality, none – foresaw the post-COVID boom in house prices, and once it got going we were all keenly looking for when it would peter out. In truth, the slowdown has taken longer to arrive than I had been anticipating, but it’s almost certainly here now (barring some other unexpected COVID-related surprise).
For a start, sales volumes have slowed significantly, in the face of stretched affordability, higher mortgage interest rates, tighter credit availability (LVRs, CCCFA, DTIs), and possibly now a general change in sentiment/mood too – no more ‘fear of missing out’, instead ‘fear of over-paying’. When you look across agent and private sales in January, the total of around 4,100 was the lowest for that month of the year since 2011. Sales volumes have also been lower than a year earlier for the past eight months in a row.
In turn, when you see sales activity slow, property value growth tends to follow. Our index stayed fairly robust in January, but the underlying trend has certainly cooled, and by the time we get March or April’s data in April/May, the slowdown in values should be apparent in the headline figures.
These trends will tend to feed back into themselves too, or in other words become self-reinforcing. In particular, as sales have slowed – but the flow of new listings has stayed steady – the middle of the pipeline, i.e. total listings available on the market, has had time to recharge. This of course gives buyers more choice, and takes further heat out of price pressures. To be fair, the total stock of listings is still relatively low in many parts of NZ – but it’s certainly on the rise, especially in areas such as Wellington, Manawatu-Whanganui, and Hawke’s...
