Equifax reveals all
Equifax NZ has revealed there are a number of contributing factors to an expected downturn in house prices in 2022 and 2023.
In May, the Reserve Bank of New Zealand forecast house prices would fall 8.1% in 2022, while bank economists predicted double-digit declines.
The credit bureau says factors influencing the price downturn include an increased supply of new housing, as well as the continued effects of CCCFA lending obligations.
Equifax NZ has released its August Home Lending Credit Insights report, which revealed that, despite the softening market, average weekly home loan demand for 2022 was up 7.1% compared to 2019 levels.
“As we move towards spring, it will be a telling period for the housing market,” said Equifax NZ managing director Angus Luffman (pictured above). “The regions experiencing the biggest fall in home loan demand from Q1 to Q2 2022 are Gisborne (down 13%), Tasman (down 12%) and Wanganui (down 11%). However, Auckland, Marlborough and Taranaki have experienced the least reduction in home loan demand of 3% for the same period.”
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Luffman said there had been some recovery in home lending demand in the last few months following the impacts of the August 2021 pandemic lockdown and the December 2021 CCCFA implementation.
“Given time lags between enquiries and open accounts, expect this recent enquiry elevation to show through to an open account volume uplift in the coming months,” he said. “Average weekly home loan enquiries across all regions for 2022 is trending below 2021. By volume of enquiries, Gisborne is down 39.5%, Marlborough by 37% and Southland by 36.8%. By comparison, average weekly enquiries dropped in the Auckland, Canterbury and Wellington regions by 31.1%, 28.4% and 35.6% respectively.”
Luffman said a range of factors contributed to property values continuing to decline in July, including record high inflation, rapidly rising interest rates and winter which is considered a traditionally slow sales period.
“On the flipside, the low unemployment rate of 3.2% and strong GDP growth of 5.2% both provide some buffer against values trending down,” he said. “However, the quarterly rate of [property value] decline did accelerate in July to 3.6% from 2.4% in June, which equates to $39,000 lost over the last quarter.”
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Luffman said new mortgage enquiries in Q2 was down 37% year-on-year.
“This indicates how much of a strong run we had up until 2021, however this is still 7% above where we were sitting in 2019,” he said. “As we approach the back end of the year and anticipated spring property market, history tells us this time of year is generally stronger.”
Luffman said the number of new homes across New Zealand was up 17% from 2021, with 51,015 homes completed for the 12-month period to May 2022.
“There are increasing reports of builders and developers unable to cope with escalating building costs, interest rates and executing sunset clauses in sales contracts,” he said. “These factors are also creating longer construction periods, which coupled with lower sales prices is adding pressure to an already stressed construction sector.”
