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What does the future hold?

According to CoreLogic chief property economist, Kelvin Davidson, politics and regulation have had a big effect on the housing market in 2021 from extending the brightline test for existing properties, giving the RBNZ powers to use lending restrictions such as caps on debt to income ratio, (currently under consultation), meanwhile loan to value ratio rules (LVR) meant investors were required to have 40% deposits. 

At the same time, from 1 November, owner-occupiers have had it tougher too, with the low deposit lending thresholds for lenders cut from 20% to 10%. 

And all those needing a mortgage are having to take into account the two interest rate rises in October and November 2021, with more to come in 2022. Indications from the Reserve Bank are that the OCR will peak at 2.5% by mid-2023, says Kelvin. This would take a standard mortgage from 4 or 4.5% to 5 or 5.5%, with some mortgage holders seeing 6%.

Securing finance set to become harder 
In 2021 house prices rose more than expected, says independent economist, Tony Alexander. One of the biggest influences on the progress of the housing market was a credit crunch in the latter part of the year brought about by a combination of loan to value restrictions, talk of debt to income caps, the sixth fastest increase in rates since the early 1990s, and changes to the Credit Contracts and Consumer  Finance Act (CCCFA) in December. 

The latter has meant lenders are asking a lot more questions of borrowers, are wanting bigger deposits, and are harder to please. More conditional offers will be coming through thanks to the credit crunch and buyers’ inability to get pre-approvals, says Tony. 

“When the second nationwide lockdown happened, we went in knowing what happens with a lockdown: the housing market booms. The housing market continued to grow strongly,” he says.

At the same time, conditions changed markedly for investors when they could no longer deduct interest expenses on their existing properties. First home buyers surged in but their ability to act got tougher later in the year when lenders were pickier about their lending criteria.

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Source: TradeMe Property