FEATURE
Ch-ch-changes — a shift in market sentiment Jen Baird, Chief Executive, REINZ
REINZ statistics show a common theme in 2022 — a market that is consolidating at a new pace. The headwinds gathered in 2021 are making their presence felt; we see sales activity down, prices moderating, while more stock on the market — and thus more choice for able buyers — is easing demand. We explore the shift in market sentiment, and what this means for buyers, vendors and agents.
2020 and 2021 saw extraordinary growth in residential property prices across New Zealand in a competitive market driven by low interest rates and listings, and high demand. We saw this prolonged period of fast-paced activity and significant growth culminate in a national record median price of $925,000 in November 2021. Over the past months, REINZ data shows a market returning to a more settled pace. Property prices have come off their November 2021 peak in most regions and the headwinds we monitored closely have combined to ease upward pressure on property prices and soften demand, resulting in a drop in sales counts.
A buyer’s market? Over the last year, we’ve experienced several changes in the market. Rising interest rates, new tax legislation, the reintroduction of LVRs and tighter lending criteria exacerbated by changes to the Credit Contracts and Consumer Finance Act (CCCFA) in December, have added further to affordability pressures and hampered access to finance. At the same time, there is a significant increase in stock levels causing an easing of pressure on the supply and demand side of the market. Unlike the end of 2021 when stock was scarce, this year has seen more choice for buyers. In a typical buyer’s market where supply outweighs demand, this would enable buyers to set the pace and
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The Real Estate Institute of New Zealand
negotiating terms. However, the current market environment has blocked some buyers from the market — specifically those who are not backed by equity or for whom access to finance is an issue. Despite the easing of price growth, house prices are still higher than they were a year ago. Agents are telling us that uncertainty continues to linger in the market — a culmination of COVID-19 restrictions and the prospect of further changes to the lending landscape including rising interest rates and corrective changes to the CCCFA expected in June. The continued impact of COVID-19 is still seeing many people choosing to stay home or isolate — further contributing to a decline in buyer presence.
FOMO no longer — FOOP takes over Not too long ago, the market was fuelled by a fear of missing out (FOMO), however, this has now been usurped by a fear of overpaying (FOOP) among buyers. Our April survey with economist Tony Alexander stated that FOMO is essentially nonexistent, with only 6% of agents reporting FOMO on the part of buyers. As the shift in sentiment sets in, and buyers are less willing, or unable, to pay the prices we saw toward the end of 2021, vendors should consider if their expectations will meet the market. Our analysis of the current property market is driven by statistics and intelligence from those in the profession, but the New Zealand property market is influenced by
