We love to predict the future so let’s whip out the crystal ball and do our best to anticipate the factors that might influence the market in 2022.
Cost of Construction
Over the past year the cost of materials has gone up and up with no sign of slowing. In fact, there isn’t even a guarantee the stock will be available when you do need it. Anecdotal evidence indicates the cost of building a house is around 20% more expensive than it was just 12 months ago. This pain was more tolerable when property prices were rising at a similar rate. But with price growth now slowing (and in some cases even retracting) keen builders and renovators will think twice before embarking on their projects. It will also be harder for developers to pass the cost onto buyers as the increases push the price beyond the point of affordability. The issues in the construction industry are tipped to worsen which could put pressure on existing stock once again.
2022 marks year three of the Covid pandemic. A time when teddy bears in the window are a distant memory and goodwill is waning. Omicron is sweeping its way across the planet and while it might not be as severe as Alpha or Delta (although I’m not a doctor), the sheer volume of people infected is putting global workforces under unprecedented strain and that’s wreaking havoc with everyday services. Like construction materials, day-to-day essentials are impacted with supermarkets and shop shelves looking bare. We can, of course, be patient when it comes to a new TV but it is much more difficult to live without the essentials. It just may be that this is the last straw for some small businesses which have faced incredible pressure over the past two years. But when we eventually see an end to the pandemic, our actions may mimic the 1940’s post war days. During this time people were heading out in their droves to splash some cash and celebrate the end of it all. We can only hope our clean, green image still has the same appeal and an influx of tourists put some of our long-suffering providers out of their misery.
In one of last year’s barometers, I mentioned the impact inflation has on markets, especially when interest rates then rise. This time last year the RBNZ stated that they expected rates to stay low for a period of time. Fast forward six months and we have already had our first rise in the official cash rate which has had a large impact on retail interest rates. Now what was first tipped as temporary inflationary pressure, may not be so. The only way to counter this is to increase the cash rate further, which in turn is passed onto mortgage rates. The higher the rates, the less borrowers can borrow. On top of this is the tight lending from banks as a result of CCCFA changes brought in on December 1, 2021.
The Wellington Market & The CCCFA
We started to notice a bit of a change towards the end of 2021. There were several factors at play including buyer fatigue, an increase in interest rates and the introduction of the CCCFA. Simply put, the CCCFA means the banks must be overly cautious when it comes to lending. Any sign of mild risk usually results in a firm “no” to mortgage finance. You may have read stories about banks declining loans based on borrowers spending too much money on KFC, believe it or not, it’s true! The mortgage brokers we work with have been putting their clients on three month budgets to help secure lending in the future. Changes such as this tend to impact the first home buyers the most, but this in turn impacts the entire market. Without first home buyers, those looking to sell and buy a family home are stuck, and so it goes on.
With Wellington now in full swing, we will likely see the impact of all of these factors which will give us a good indication of how the year might pan out. Key metrics for keen property watchers will be the number of new listings, and days on market.
Wellington market quick stats
What’s on this February in Wellington?
Destination Mars, Te Papa, 55 Cable Street, On until 20 Mar 2022
It’s 2034, and you are on the planet Mars. As the engineer in the control room on an international space station, you protect the base’s support systems and power up the next rocket launch. But when a solar flare plunges your community into danger, you must work together to avert disaster. Have you got what it takes to save the day?
Eden Hore: High Fashion/High Country, The Dowse Art Museum, Lower Hutt, On until – 20 Mar 2022
Hailing from rural Naseby in central Otago, Eden Hore began collecting the dresses after attending a Miss New Zealand pageant by chance, and he eventually transformed his farm shed into a fashion museum. A man of many unexpected interests, Hore also collected exotic taxidermy animals, and bred miniature horses and Tibetan yaks.
Urban Dream Brokerage Summer Series, Various locations Wellington, On until 28 Feb 2022
This summer Urban Dream Brokerage is helping dozens of artists present performances, installations, and events around the capital’s central city.
Urban Dream Brokerage works with property owners, taking CBD spaces, be it public or commercial, empty, or underutilised, and filling them up with temporary art projects. Their programme has encouraged the innovative use of vacant retail and public space to creatively build community.