A mortgage is not just getting more expensive as interest rates rise. A mortgage is now hard to get full stop, says Jarrod Kerr, Kiwibank’s chief economist.

Changes to consumer credit legislation from December 1 is exacerbating the tightening of credit conditions, he says.

It is also the view of REINZ chief executive Jen Baird, who says there are signs of deceleration in the annual price growth of houses compared with previous months.

“While the market remains confident, the impact of rising interest rates, tighter lending criteria and changes to investor taxation restrictions are starting to shift dynamics.

“In particular, the introduction of the Credit Contracts and Consumer Finance Act (CCCFA) on December 1 – which requires stricter scrutiny of borrowers’ financial health – seems to have had an immediate effect. Feedback from several regions notes a fall-off in buyer numbers – particularly first-time buyers – as a result.

“Over this year, the impact of these changes and anticipation of further interest rate increases are likely to play out in the market, leading to a gradual slowdown in the pace of price growth,” says Baird.

Median prices for residential property across New Zealand increased annually by 21.5%, from $745,000 in December 2020 to $905,000 in December last year. Although year-on-year growth continues, this was a 1.6% drop compared to a strong November.

The median residential property price for New Zealand, excluding Auckland, rose annually by 20.6% from $630,000 to $760,000 – a 1.3% decline from November.

Additionally, Auckland’s median residential property price increased 25.9% annually from $1,025,000 in December 2020 to $1,290,000 in December last year – down a marginal 0.8% on November.

Baird says 19 territorial authorities had median price records in December. However, this was the lowest number since July. The number of sales across the country dropped 29.4% annually, from 9,573 in December 2020 to 6,755 in December last year.

The number of properties sold was also down 21.4% month-on-month. For New Zealand, excluding Auckland, the number of properties sold in December dropped 26.6% annually from 6,048 to 4,442. While in Auckland the number of properties sold declined 34.4% annually – from 3,525 in December 2020 to 2,313 in December last year. Month-on-month there was a 26.6% drop.

Consents Smash Records

A record 48,522 new homes were consented in the year ended November 2021, Statistics NZ data show.

This was up 26% compared with the year ended November 2020 and smashed all previous records.

In November 4,688 new homes were consented, which is the highest number for any month on record, says Michael Heslop, construction statistics manager. The previous record was 4,490 in August.

Auckland led the charge, with 20,384 consents for the November year, up 25% annually. “This is the first time Auckland has passed the 20,000 mark,” he says.

Regions with the next highest number of new homes consented were: 7,526 in Canterbury, up 30% annually; 5,062 in Waikato, up 26%; and 3,633 in Wellington, up 22%.

In the year ended November, the number of new dwellings consented per 1,000 residents was 9.5, compared with 7.6 in the November 2020 year. The highest number of new homes consented per 1,000 residents was 13.4 in the year ended December 1973.

Of the 4,688 new dwellings consented, 2,126 were stand-alone houses, although when seasonally adjusted, this was a fall of 6.2%, after falling by 2.2% in October; 1,777 townhouses, flats, and units, 490 apartments and 295 retirement village units.

In Auckland, the number of multi-unit homes consented in the year ended November 2021 is now triple that of five years ago.

By region, the number of new dwellings consented in the year ended November compared with the November 2020 year were: 20,384 in Auckland, up 25%; 5,062 in Waikato, up 26%; 3,633 in Wellington, up 22%; 7,911 in rest of North Island, up 32%; 7,526 in Canterbury, up 30%; 3,997 in rest of South Island, up 14%.

For the ninth month in a row the previous record for the highest number of homes consented in a year has been exceeded.

In value terms, the actual value of building work in place was $7.2 billion in the June 2021 quarter, up nearly 50% from the Covid-19 impacted June 2020 quarter, Statistics NZ data show. Within this, residential building work rose 59% to $4.9 billion in the latest quarter.

Despite a flood of new listings helping to dampen home value growth they are failing to stop it altogether, says QV.

QV’s latest data show the average home increased in value by 7.8% nationally over the three-month period to the end of December, up from the 6.9% quarterly growth in November, with the national average value now sitting at $1,053,315. This represents an average annual increase of 28.4% for last year.

In the Auckland region, the average value now sits at $1,527,092, rising 9.7% over the three-month period, with annual growth of 29.1%, increasing from 27.9%.

QV operations manager Paul McCorry says it is fair to say last year was a pretty unusual year for the property market.

“Never in recent times have we had so much external intervention in a housing market and yet, in the midst of a global pandemic, the market grew by a record 28.4% nationally.

“It became pretty clear towards the end of the year this level of growth was not going to continue indefinitely as the quarterly rate of growth started to decline.”

In November the rate of quarterly growth in three quarters of the major urban areas QV monitors was still increasing. Last month, half are now showing a decline. “To be clear, values are still going up – but at a much slower pace,” says McCorry. “Of the other half that are still showing an increase in the rate of growth, five have risen by less than 1%. The market has definitely pumped the brakes, but it hasn’t ground to a halt completely.”

More Choice For Buyers

Christchurch City is the obvious winner of the unwanted “biggest increase” title in 2021. The Garden City saw values lift a staggering 40.2% year-on-year, “a symptom of a market a little earlier in the growth cycle, where relatively speaking things were a little more affordable”.

In real terms, that means in January last year the average Christchurch house price was about $560,000; now it is $785,000. While the rate of growth has slipped a little in the past quarter, it is still in the double digits over a threemonth period at 11.6%.

McCorry says in recent months there has been a flood of listings to the market, but with more choice for buyers agents won’t get as many multi-offer situations. “The chatter about properties being handed in at auction is real, as is property sitting on the market beyond the initial tender period – often relisted with an asking price.”

Listings of properties for sale have increased dramatically in the past couple of months, although the country is still some way from being a buyer’s market.

Latest data from realestate.co.nz shows there were 4,000 more properties listed for sale in December than in December 2020.

Wellington had the biggest share of listings, at 206.6% year-on-year in December, followed by Manawatu- Whanganui at 133.7%, Wairarapa at 111.8% and Hawke’s Bay at 107.4%. In Auckland listings were up 30.7% and Canterbury 54.4%. Only Northland had a drop in listings – down 1.7%.

The national average asking price was $985,245 in December, up 23.4% on a year earlier. Hawke’s Bay had the biggest increase at 36.9%.

Realestate.co.nz spokeswoman Vanessa Williams says buyers across the country have more choice. “This could mean less FOMO (fear of missing out) and perhaps even more properties hitting the market,” she says. “If sellers are confident they’ll be able to purchase after they sell, we could see this number continue to climb.”

Typically, more stock results in cooling prices because buyers have more choice, but Williams says that hasn’t happened yet. “If stock continues its upward trend this year, it’ll be fascinating to watch the impact on asking prices.”

During December there was a 5.6% rise in listings. Wairarapa had the biggest increase, with 25.7% more properties on the market.

At the existing rate of sales, Wellington’s available stock would sell out in nine weeks, compared with a longterm average of 15. Auckland’s stock would sell in 14 weeks, compared with a long-term average of 22, and Canterbury in seven compared with a long-term average of 22.

Rental Prices Surge

Nationally rental costs have surged 17% over the past three years.

Auckland’s median weekly rent was $600 for the second month in a row in November.

In the Wellington region the median weekly rent was $620 for the second month in a row in November. Wellington City’s median weekly rent fell slightly month-on-month to $630, from $645 in November. This puts the district alongside Porirua at $650 a week and Lower Hutt $600 as one of the most expensive spots in the region.

In the main centres renters are seeking quality homes, with the percentage increase in rental returns higher for upper quartile rental homes.

Wellingtonians spend 24% of their income on rent. Aucklanders spend 28%, due to lower income levels, than the capital. Rental affordability is at its worst in lower income areas of New Zealand. In Horowhenua, due to low income levels, residents will pay a chunky 40% of their income on rent.

Meanwhile, Aucklanders moving to or purchasing a holiday home in outlying provinces such as Thames-Coromandel and Kaipara means residents of both areas will pay 37% of their income on rent.

The most affordable rental accommodation is found in Southland District, where residents will pay on average 19%, Mackenzie District where they’ll pay 20% of their income on rent, and Selwyn 21%, despite its high nominal rental costs, because it also has high household income levels.