We spoke to eight of our regular property investment commentators. Here’s their expert opinions on what will influence the market in 2022.

The Economists

Tony Alaxander, Independent Economist

House price growth will flatten out this year and price increases should drop to about 5% by the middle of the year.

The factors leading to lower house price increases include a brain drain, higher interest rates, tightened lending and investors staying away from the market.

When the borders reopen properly there will be an exodus, by mainly young people, to Australia for better wages and lower house prices.

Investors will not come back into the market. There will be a slight increase in the number of investors selling property, but the vast majority see rentals as a long-term game and are prepared for the vagaries of the market. The implications of the Government’s decision to remove mortgage interest payments as a tax-deductible expense will not hit “mum and dad” investors until they start preparing their tax returns in April. That could cause a few to sell. However, the buying frenzy by investors is over.

The bulk of interest rates rises in the three-to-five-year bracket have occurred as the trading banks have been aggressive in this area, even before the Reserve Bank started raising the official cash rate (OCR). The one-year rate could go up another 2% and the 18-month rate could rise another 1.5%.

There has been an abrupt end to some lending by banks in anticipation of the tighter rules in the Credit Contracts and Consumer Finance Act [which began on December 1] as well as the limit on loans to people with less than a 20% deposit. Some banks are also already implementing debt-to-income (DTI) limits. There is a far greater decline rate for mortgages by banks. Credit availability will be tight this year.

Sharon Zollner, Chief Economist, ANZ

There has been a sense that the housing market is bullet-proof. But a 31% rise makes the market much more vulnerable to a hard landing. We all underestimated the effects of a positive housing policy, so we would be silly to underestimate to the effects of policies tightening. It’s hard to engineer a soft landing from the heights that we have been experiencing.

Tax increases for investors will change the maths quite a bit. This, associated with interest rate rises, will start to make investors think about their options as mortgage repayments start becoming higher than rents. Many people will be experiencing stretched affordability because of the cost of housing.

There is a possibility of DTI ratios being introduced, and a lot of buyers will find it harder to gain access to the money they need for investments. There has been a lot of FOMO in the past year, with people thinking that houses are a one-way bet, but the rises we have seen will start to retreat (unless we get more record-high house prices).

Listings are above normal for this time of year, there is a huge amount of supply on stream, and we are continuing to experience negative net migration. These factors are likely to dampen the market, and we are forecasting single digit price growth over 2022.

The Property Professionals

Kris Pedersen, Mortgage Broker

Finance is as tight as I’ve seen since the GFC. The combination of interest rates rising, plus massive over-regulation, is causing real issues. The Responsible Lending Code hit first home buyers, and my sense is that the Reserve Bank wants to hit investors, and banks are being extremely tough when it comes to lending.

There is extreme scrutiny on spending, which came ahead of the consumer credit law changes. These rules have moved from protecting the vulnerable to scrutinising everything that happens in your bank account. Those with higher discretionary incomes are being hardest hit. In many cases it is ridiculous. As an example, I have a great client who is regularly saving money. One of the banks asked if he could confirm he was able to stop saving, because it was judged as an expense and taken as part of his discretionary income when assessing his mortgage application.

My concern is that in the guise of responsible lending, people will be pushed into financial problems. It is a perfect storm. RBNZ, in my opinion, has its weakest governor, who is going along with everything the Government wants.

I am worried that Grant Robertson won’t be happy if this round of changes doesn’t lead to a significant slowing of the housing market, will react too strongly, and impose a DTI restriction.

I can’t see the housing market not being affected in some way by these factors.

Peter Thompson, Managing Director, Barfoot & Thompson

Historical records show that any time is a good time to make a medium-to-long term investment in housing.

Our sales data shows that for the past 60-plus years on the rare occasions prices have retreated, within a few years they have recovered. If you are not compelled to sell during any down period, your capital should not be eroded.

What is most likely to occur in 2022 is that Auckland prices will continue to increase, but the rate at which they increase is likely to be much lower than we experienced in 2021.

In such a market, what becomes more relevant than price is your monthly outgoings for mortgage, set costs such as rates, and repairs and maintenance. Can you sustain those outgoings if interest rates increase (which they are likely to do) or you have a period when your investment is not occupied?

Other issues to consider are that during the next few years the regulatory environment is not likely to be house investor friendly, and the flow on effects of Covid are likely to continue to influence the economy. However, in relative terms mortgage interest rates are likely to remain low, Auckland’s population will continue to grow, and the housing supply situation will take many years to resolve. Investing in property in 2022 may not have the growth potential that occurred in 2021 but it still represents a sound choice in a balanced investment portfolio.

David Faulkener, Head Of Property Management, Property Brokers

This will hopefully be the year that sees a framework put in around the regulation of property managers. There may also be some regulation around self-managers of residential properties: private landlords are running a business and there will be increased requirements around privacy that all property managers need to be aware of.

I think that in the first quarter of the year property managers will be trying to get their heads around the changes with Healthy Homes. The heating calculator around the new standards is flawed; it’s really frustrating and we are having to pass on accurate information to landlords we work with and their tenants.

I was involved in the new guidelines around privacy when it comes to tenancy applications. My opinion at the time was landlords’ understanding of privacy around rental applications was very poor; I think these changes are important. People were also discriminating without knowing it; saying they didn’t want students, for example, is a form of discrimination that people weren’t really aware of.

Something I would love to see change is an improvement in the bond system. I think it is outdated; having to provide a few weeks rent every time a tenant moves can be difficult. I think a good alternative would be a voluntary property insurance system. If there was an option of paying, say, $200 a year insurance to help cover any damages (if they arise) would be a useful alternative.

The Property Investors

Sharon Cullwick, Chief Executive Officer NZPIF

I expect the realities of the Government’s decision to phase out (over four years) the ability for investors to claim mortgage interest payments as tax deductible against their rental income to hit home in April when tax returns are being prepared.

Many investors are sitting on the fence and I think they will get a shock once April rolls around and they realise how much extra tax they will have to find. And I expect landlords will exit the industry by selling up and moving their money into some other form of investment.

House prices will also start drifting back and many investors who are not highly leveraged will sit on the fence and wait to see what happens. A flattening economy, higher interest rates and tightened bank lending will all contribute to the pull-back.

While the Government is incentivising investors to buy new builds, as the new tax rules do not apply, it is difficult to make them stack up as rentals. Tenants will not pay the rents expected, so investors can’t see any money in these deals.

Investors are in a no-win market. They can’t get yields on new houses but can claim tax deductibility, whereas they can get yields on older houses but can’t claim tax deductibility. It’s difficult for them to know what to do.

Andrew Bruce, Property Investor

The one message I would have for investors is, if you have a settlement coming up this year, go early. In my own experience it is becoming extremely difficult to get funding. The criteria is constantly changing. We are relatively conservative investors, but we are struggling. The DTI ratio and the CCCF Act changes (which are politically driven) are making the process extremely slow. Broadly speaking, it is putting me off doing anything.

The DTI document is out for consultation, but many of the banks are already enacting it.

People who bought off the plan two, three, or four months ago, who are due to settle this year, may find it takes a lot longer to get finance approved.

[We have had] apartments in the inner city, but since the foreign language students have left New Zealand due to Covid-19, there are many more vacancies than usual.

Many of these apartments are being taken up by social housing providers, and this is changing the balance of the inner city.

We have had a few problems in this area, and we are selling some of our apartments here.

The general vibes I am getting is that investing is going to be quite hard in 2022. For the first time I have chosen to invest in something other than property recently

I really think this is the start of things getting tougher for those who invest in the property market.

The Data Guy

Nick Goodall, Head Of Research, Corelogic

The biggest factor influencing the housing market this year will be tighter credit alongside investor realisation about how the tax changes will affect them.

The slowing momentum that started last year is likely to continue, especially with fewer owner-occupiers being able to secure high-LVR loans since November 1. And from December 1, the changes to the Credit Contracts and Consumer Finance Act (CCCFA), which brings greater scrutiny of a potential borrowers’ expenses and ability to repay their loan, will further limit the amount of lending written by banks.

Given the continued upwards trajectory of mortgage interest rates, and some banks already implementing DTI limits, it’s clear that demand for residential property will be negatively impacted. Although the Reserve Bank has indicated it won’t officially introduce DTIs until the last quarter of the year, if at all, banks are obviously taking a cautious approach and using them now to increase financial stability across the economy.

Rising listing volumes are also set to act as a headwind for property value growth. While on nationwide there are still fewer properties available than at the same time in the last two years, the opposite is true in some regions.

The lift in advertised stock levels is most acute in both the wider Wellington and the Manawatu-Whanganui regions, where there are 30% and 33% respectively, more properties for sale now, than the same time last year. Hawke’s Bay (+22%), and to a lesser degree Southland (+2%), also have more properties on the market than this time last year.

This steep recent increase is not a reflection of an unusually high number of properties being newly-listed for sale as the flow of new listings remains consistent with prior years; it is a result of fewer properties selling as buyers become less willing or able to pay prices asked by vendors.

At this stage sellers aren’t adjusting their price expectations, which leads to somewhat of a standoff as properties take longer to sell.

The likely outcome will be seen in either downward price adjustments from vendors or more properties being withdrawn from the market without selling.