An unremarkable end to a remarkable property year in NZ

A remarkable year for New Zealand’s residential property market came to an unremarkable end, according to property intelligence firm QV, who noted a flood of new listings helped dampen home value growth but didn’t manage to completely halt price increases.

The QV House Price Index for December 2021 found the average home increased in value by 7.8 per cent nationally over the three-month period to the end of December, up from the 6.9 per cent quarterly growth seen in November.

With national average values sitting at $1,053,315 in December, this represented an average annual increase of 28.4 per cent for 2021.

Christchurch City led the charge when it came to price increases throughout the year.

The Garden City saw values lift a staggering 40.2 per cent year-on-year.

QV Operations Manager, Paul McCorry attributed the steep increase to the fact Christchurch property prices had started the year at a more affordable price point in relation to other areas.

In real terms, in January 2021 the average Christchurch house price was around $560,000.

By the end of December it averaged $785,000.

While the rate of growth slipped a little in the December quarter, it was still in the double digits over the three-month period at 11.6 per cent.

In the Auckland region, the average value at the end of the December quarter was $1,527,092, climbing 9.7 per cent over the three-month period.  

This meant annual growth for the region was 29.1 per cent for the year.

“It is fair to say that 2021 was a pretty unusual year for the property market,” QV Operations Manager Paul McCorry commented.

“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 per cent nationally.

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

In November, QV reported that three quarters of the major urban areas they monitor were still seeing an increase in the rate of quarterly growth.

This time around, half are now showing a decline.

“To be clear, they are all still seeing values go up – but at a much slower pace,” Mr McCorry added.

“Of the other half that are still showing an increase in the rate of growth, five have increased by less than 1 per cent. The market has definitely pumped the brakes, but it hasn’t ground to a halt completely.”

“Aucklanders have been doing the hard yards for the rest of Aotearoa throughout 2021, moving through the various lockdowns and traffic lights,” Mr McCorry said.

“After over 100 days in lockdown it is no surprise to see the Super City catching the wave of a now internationally recognised trend – a post lockdown boost to the property market, up 9.7 per cent over the quarter. A prolonged period at home and now a relaxing of these restrictions will have people taking stock of their living arrangements.”

At every summer barbeque the conversation will have inevitably turned to what the market will do in 2022, but Mr McCorry said predictions can be fraught with danger.

“Following the March 2020 lockdowns, doom and gloom was rife with predictions of a market correction.

“Yet since March 2020, values nationally have increased almost 41 per cent. So what do the next 12 months have in store? Inflation and the interaction with interest rates will be key,” he said.

The Reserve Bank of New Zealand measures the average increase in the cost of goods and services and aims to keep that rate of price inflation between 1-3 per cent.

The third quarter result was 4.9 per cent – so considerably higher than expected.

“The most likely lever to reduce this rate going forward is to increase the Official Cash Rate (OCR), which in turn increases interest rates banks will offer to prospective homeowners,” Mr McCorry said.

“We saw successive increases in the OCR in October and November, and it is no surprise that this was when we started to see the tide turn a little in the rate of growth.

“At this point in time, despite these increases, interest rates are still considered low by historic standards and this has most likely prevented the market being absolutely stuck in the mud.

“But any more increases could start to make both banks and their borrowers feel pretty nervous. More rigorous lending criteria that came into effect in December will also have banks really scrutinising every application.”

Meanwhile, he said in recent months New Zealand had seen a flood of listings to the market.

He attributed the listing surge to the fact that people tended to hold off putting their home up for sale until the good weather.

“With increased listings, buyers have more choice,” he said.

“They won’t attend every open home and you 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 re-listed with an asking price.

“Managing vendor expectations coming out of 2021 and into 2022 will be a very advantageous skill set for an agent,” Mr McCorry added.

“If we had to draw a line in the sand, you could reasonably expect values growing in the smaller single digits towards the middle of the year and potentially remaining stable throughout winter, but 12 months is a very long time in a property market and realistic pricing and realistic vendors will prevail in 2022.”

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