Reflecting on the past year and considering what’s to come in 2023.
How do we summarise the New Zealand property market in 2022? “Contrast” comes to mind. “Against the grain” might be another appropriate phrase. It was an exceptionally intriguing year for New Zealand’s property market.
Professionals at all levels of the sale and purchase of property recognised a significant shift in what had previously been a “sellers’ market” and as we head into 2023 it leaves much room for reflection. Although unrest was to be expected, given the noise of inflation post-pandemic, the nature of last year’s property market has brought about much to consider in the new year. Late 2022 saw a decline of house prices at about 4.5% nationally, leaving many surprised by the remarkably uniform decrease of housing prices from their peak in late 2021.
House prices in Wellington decreased by a whopping 11.7% from October 2021 to October 2022. In Auckland, the decrease in house prices peaked at 4.7% in October 2022 compared to the year prior. Decisions of the Reserve Bank continued to encourage the swelling of interest rates on mortgages, meaning property supply continued to weaken, and prices dropped.
The conveyancing sector finished the year on an unsure footing affecting all Kiwis on the property ladder. Scratching heads we ask: “What might the property sector hold for 2023?” The general echo was economists’ hypothesising that prices will continue to drop until the end of 2023. Furthermore, we have been warned to expect further increases to interest rates, with some suggesting we should be prepared to see fixed interest rates as high as 9% in 2023.
The uncertainty of a tightening property market appears content on following us through 2023. But like a wheel turning, the cyclic nature of the market means a decline in property prices will, at some point, move towards stability. Whether we can expect this in 2023 is uncertain. The market is influenced by various of internal and external factors, and therefore, any relief emerging through the year must be anticipated patiently. But it’s not all bad. We have recently seen some great initiatives introduced which have opened opportunities for one particular area of the market: first home buyers.
Of note are new strategies targeted at mitigating barriers to the purchase of a first home. One example is the initiatives of Kāinga Ora. Various innovative pathways have been created to encourage both families and individuals to join the property ladder. Of particular significance, Kāinga Ora is aiming to tackle one of the greatest obstacles for first home buyers – the dreaded deposit – by lowering the market expected 20% to a far more palatable 5%.
Whether it be the First Home Grant, First Home Loan or First Home Partner Scheme, Kāinga Ora is providing greater opportunities to take advantage of a decline in house prices. Couple these initiatives of Kāinga Ora with the increasing slowdown of vendors to the market, and 2023 may be one of the stronger years for first home buyers to get their hands on those first set of keys.
The value-to-income ratio continues to climb post-pandemic, meaning that first home buyers should feel more confident in their ability to find their first home. Kāinga Ora pathways are still relatively under-utilised, with much to be learnt among professionals and potential home buyers alike. However, innovative strategies like these bring about an optimism that more Kiwis may be able to achieve their goals and become homeowners this year. We look forward to continuing to provide conveyancing support to existing and new clients throughout Hawke’s Bay during 2023, and are excited by the opportunity to help more first home buyers achieve their goals through the strange but inviting nature of our current market.
