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List: Be on the lookout for interest rate hikes and their effects on the real estate market. Photo / provided
National home sales data released early next week seems unlikely to show a major adjustment, but that could change soon, according to a financial expert.
Mark Lister, Head of Private Wealth Research at Craigs Investment Partners, does
forecast a big shake in the real estate institute’s sales data which will be released next Tuesday.
“I expect the numbers for December to still look strong. I think we may have to wait a few months to get a clearer picture of the impact of rising interest rates,” Lister said. today.
“Most economists and commentators expect a much slower housing market in 2022, although that doesn’t necessarily mean lower prices. Significantly higher mortgage rates will inevitably be biting, but it’s probably too soon. so that it appears in the data. “
His comments follow figures from Barfoot & Thompson from last week, which showed strong sales activity.
Peter Thompson, Managing Director of Barfoot & Thompson, announced that new price records have been set and more than 200 properties have sold for over $ 2 million.
The December average of $ 1,278,647 was up 7.4% for the quarter and 17% annually. But the median of $ 1,235,000 was up 22.9% per year, he said.
“The market took the news of rising interest rates, tighter bank lending criteria and changes to investor tax restrictions, with strong buyer interest until Christmas Eve,” said Thompson.
But Lister and many others, including the Reserve Bank, say we need to change.
“I wouldn’t underestimate the impact of higher interest rates. Low interest rates have been the main driver of this real estate boom in my opinion, so a sharp reversal in the cost of money will certainly have an impact. The 1-year mortgage rate moving from 2.2% to 3.7% in six months is huge, ”Lister said.
He has no doubts that higher mortgage rates will have an impact at some point, although he noted that there is usually a lag because most of us are fixing our mortgages and some buyers might have gotten pre-approvals. “The next few months will be fascinating,” Lister predicted.
Inflation and interest rates will remain in the spotlight this week, with the December US CPI report due on Wednesday likely being the highlight. Markets expect the Annual inflation rate reaches 7%, a high of almost 40 years, “Lister said.
REINZ’s figures won’t be released until next week, a little later than the mid-month date of this national organization.
This would be due to the holiday period and delays in collecting data from the agencies.
REINZ said that between January and November, 81,256 residential properties were sold in that country.
Nick Goodall, head of research at CoreLogic, says prices could rise further but the rate of growth will be slower, and he says there should be fewer interventions in the coming year.
Michael Gordon, acting chief economist at Westpac, believes the market may flatten out and prices may even drop a bit this year.
In August, the Te Pūtea Matua Reserve Bank said house prices were above sustainable levels.
In comments prepared for a finance and expenditure committee hearing, Governor Adrian Orr said they were above a sustainable level given the outlook for housing supply and demand.
“The main drivers of housing supply and demand have reversed.”
Underlying demand for housing has declined significantly due to weak population growth since the Covid-19 outbreak last year. At the same time, home construction is at record highs and mortgage interest rates are rising, he noted.
“We expect house price inflation to moderate significantly over the coming period. In our projections, house prices are expected to eventually decline as housing market dynamics wane.”