PHOTO: NZ property market. FILE
It’s thought that “realistic pricing” will prevail in 2022 as house value growth is expected to slow into the single-digits after a monster couple of years.
QV released its latest House Price Index on Thursday morning, revealing the average house in New Zealand is now valued at $1,053,315, an average annual increase of 28.4 percent for 2021.
The national average value increased by 7.8 percent nationally over the last three months to the end of December. That was up on the 6.9 percent quarterly increase to the end of November.
In Auckland, the average value is $1,527,092, up 9.7 percent over the three months or 29.1 percent over the year. That’s a rise from the annual increase to the end of November of 27.9 percent. QV says the region experienced a “post-lockdown boost”, with people now taking stock of their living arrangements after so much time at home.
Wellington had a 3.2 percent quarterly rise to $1,086,421, while Christchurch City jumped a massive 11.6 percent to $783,528, though that quarterly rise is down on that seen a month prior.
QV said Christchurch City was the clear winner of the ‘biggest increase’ title for 2021, with values there lifting 40.2 percent annually. In dollar terms, that means a house priced at $560,000 in January is now sitting at about $785,000.
“It is fair to say that 2021 was a pretty unusual year for the property market,” says QV Operations Manager Paul McCorry.
“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 percent 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.”
It was reported by QV in December that three-quarters of major urban areas were still seeing an increase in the rate of quarterly growth. However, half are now showing a decline. That means houses there are still on average going up in value, but at a slower pace.
“Of the other half that are still showing an increase in the rate of growth, five have increased by less than 1 percent. The market has definitely pumped the brakes, but it hasn’t ground to a halt completely.”
So where do things go from here? McCorry expects that’s one of the big questions swirling around barbeques this summer. But he warns 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 percent. So what do the next 12 months have in store? Inflation and the interaction with interest rates will be key.”
With annual price inflation sitting at 4.9 percent in the third quarter, McCorry says the most likely lever to reduce the rate going forward will be to increase the Official Cash Rate (OCR). This leads to increased interest rates being offered to prospective homeowners. It occurred in October and November, just as growth began to slightly slow.
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