National house sales data out early next week appears unlikely to show major adjustment but that could change soon, one finance expert says.
Mark Lister, head of private wealth research at Craigs Investment Partners, doesn’t forecast any big jolt from Real Estate Institute sales data to be issued next Tuesday.
“I expect the December figures to still look solid. I suspect we might need to wait a few months to get a clearer picture of the impact higher interest rates are having,” Lister said today.
“Most economists and commentators are expecting a much slower housing market in 2022, although that doesn’t necessarily mean price falls. Sharply higher mortgage rates will inevitably bite, but it’s probably too early for this to show up in the data.”
His comments follow last week’s Barfoot & Thompson numbers which showed strong sales activity.
Peter Thompson, Barfoot & Thompson managing director, has announced that further price records were set and more than 200 properties were sold for $2 million-plus.
December’s average $1,278,647 was up 7.4 per cent for the quarter and 17 per cent annually. But the $1,235,000 median was up 22.9 per cent annually, he said.
“The market took news of rising interest rates, tighter bank lending criteria and changes to investor taxation restrictions in its stride, with strong buyer interest right up to Christmas Eve,” Thompson said.
But Lister and many others including the Reserve Bank say brace for a change.
“I wouldn’t underestimate the impact of higher interest rates. Low interest rates have been the single biggest driver of this housing boom in my opinion, so a sharp reversal in the cost of money will definitely have an impact. The 1yr mortgage rate moving from 2.2 per cent to 3.7 per cent within six months is big,” Lister said.
He has no doubts the higher mortgage rates will have an impact at some point, although he noted there is usually a lag because most of us fix our mortgages and some buyers might have had pre-approvals in place. “The next few months will be fascinating,” Lister predicted.
“Inflation and interest rates will remain in the spotlight this week, with the December CPI report in the US due Wednesday likely to be the highlight. Markets expect the annual inflation rate to rise to 7 per cent, a near 40-year high,” Lister said.
REINZ figures will not be out till next week, slightly later than the mid-month date from that national organisation.
That is understood to be due to the holiday period and delays collecting the data from agencies.
REINZ said that between January to November, 81,256 residential properties were sold in this country.
Nick Goodall, head of research at CoreLogic, says prices might still grow but the rate of growth will be slower, and he says there should be less intervention in the year ahead.
Michael Gordon, acting chief economist for Westpac, thinks the market could flatten and prices even fall a little this year.
In August, the Reserve Bank Te Pūtea Matua said house prices were above sustainable levels.
In comments prepared for a hearing of the finance and expenditure committee, Governor Adrian Orr said they were above a level that is sustainable given the outlook for the supply of, and demand for, housing.
“The key drivers of housing supply and demand have turned around.”
Underlying demand for housing has declined significantly due to low population growth since the outbreak of Covid-19 last year. At the same time, house building is at record high levels and mortgage interest rates are rising, he noted.
“We expect house price inflation to moderate significantly in the period ahead. In our projections, house prices are assumed to eventually fall as momentum in the housing market fades.”
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