What the housing market can expect in 2023
JAMES WILSON looks at the factors that have an impact on buyers and sellers in the next 12 months.
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Reduced sales activity
There’s nothing that points to a big uptick in sales volumes next year. We're seeing more properties come to market off the back of spring and we expect that to continue into summer but we're not necessarily seeing them flying off the shelf, they’re still a wee bit subdued in terms of getting ink on paper.
There might be a bit more activity in terms of people out looking but it remains to be seen whether that translates into sales.
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Volatility in the numbers
If there are lots of sales one month and hardly any sales the next month, the numbers could really start to jump around. The performance of various submarkets will be key to understanding what’s going on. For example, performing quite strongly right in Auckland are new-build townhouses in the sub- $1.5m price bracket – your typical first home buyer-type territory. But if you look at the $3m- plus larger townhouse market in Auckland, there’s not the same level of demand.
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Who will buy and sell?
First home buyers will be on the hunt for opportunities next year. Less competition from investors means they will be able to stay more active in the market, and keep their share high, even if the actual number of deals falls away. Investors are very sensitive to interest rate increases, and while we couldn’t say with confidence their share of the market will decline significantly from current levels, they will be under pressure.
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The election
No date has been set but in the past people have usually hit pause on any housing market decisions in the lead up to a general election. In a hot market, the FOMO (fear of missing out) effect takes over but we don't have that anymore so the pause effect could be greater than the last few elections.
A change of government could be a boost to the investor market, given that National has signalled that it wants to address some of the changes brought in by Labour to curb investor activity. Watch this space on where policy lands; the bright line rule could be reduced and the laws around the ring fencing of losses could be rolled back.
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Ocr/interest rates
Interest rate rises are likely to keep rising, with the Reserve Bank clearly signalling in its last statement of the year that further increases in the Official Cash Rate are on the cards in a bid to bring down inflation. While the rise of 75 basis points last month is the biggest cash rate rise in the Bank’s history, the references to a recession and rising unemployment that could have a much bigger impact, scaring would-be buyers and sellers into hitting pause.
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In ation
Inflation is the elephant in the room and won’t disappear overnight. But while cost of living pressures are reaching across nearly all parts of our daily lives, we're actually not seeing a significant drop in spending and that's probably because a lot of people still haven't had to fix their mortgage at a higher rate.
When that happens and those mortgage rates begin to really bite, then spending is likely to dry up.
Obviously, that has bigger economic impacts but the key question is: will inflation be tamed by traditional policy or will a hard, economic landing do the job? At this point, a lot of signs point to a harder landing than would be ideal.
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Property values
Property values have softened and that trend is likely to continue into next year but at a slower rate.
Expect probably more of a flat market as a rule as opposed to a continually declining market, but I wouldn't be surprised if that could take a couple of quarters to really reveal itself.