2022 Review & 2023 Prediction (2/2)
The property market saw massive changes last year, and it is expected there are a lot of highs and lows in 2023 as well. 2023 started with an unexpected flood in Auckland, will follow by RBNZ planned economy slowdown (maybe recession) and then the election. No need to say high and low create opportunities for people who are in the market, ready and know what going to happen. Let’s start with predictions for the next 12 months:
- Interest rates: RBNZ will increase OCR another 0.5~1% in the next 6 months. Then potentially 1 year fixed rate which is early 7% now reaches to 8% or higher, other rates follow the same. The rates will remain in the same range till the end of the year.
- Access to money: It is clear increasing interest rates will impact borrowers’ servicing and significantly will reduce the borrowing power.
- Recession, inflation: Considering planned RBNZ economy slowdown, inflation, and higher interest rates will result in more companies including construction properties bankrupted. I highly recommend buying properties almost finish and ready for CCC and title.
- Election: It is usual property market and economy to slow down (or hold) couple months before the election in October 2023.
- Rent: Considering borders are open more tourists, work & student visa holders are coming to New Zealand and need homes for rent, recent flood damaged a significant number of properties and their occupants need to rent and finally inflation, interest rate tax deductibility & higher interest rate will push rent significantly higher.
- New build properties: In this post, I explained why new build property prices will increase.
- Property price: There is a clear link between interest rates and house price growth. When interest rates are high, It is harder to get a mortgage and more expensive to pay back, so the demand for property decreases. While the property market has already dropped significantly (Wellington 20.2% and Auckland 18%), the prediction is that values will continue to decline in 2023.
- Labour market and unemployment: Considering more temporary work visa holders coming to New Zealand and business costs increasing, the labour market will change and more employees will be available than required and wage increases will be slow down.
- RMA change: And finally RMA changes will come into effect on August 2023 impact to land prices and some areas.
If you have been waiting for the market to cool, remember that lower house prices don’t necessarily equal better affordability. Higher interest rates will mean that the cost of property ownership will remain high for new entrants. If you are planning to buy or invest in property let’s have 30 minutes catch up and finally any questions about how these impact the property market contact me here.