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The year in review

2023 started with a property market in the doldrums and sentiment wasn’t improved in Auckland initially with the city experiencing the wettest January on record and then Northland and Hawkes Bay getting hammered by Cyclone Gabrielle in February.

Property sales were especially sluggish continuing from what we saw towards the back end of 2022 with property data firm CoreLogic reporting that the number sold to February had been the lowest 12-month total in 40 years. This wasn’t especially surprising with values continuing to decrease at a rapid rate and starting the year with the expectation that the Reserve Bank had a fair way to go to get inflation under control.

Unlike in previous downturns the banks showed a willingness to lend although they were stymied by over-the-top bureaucracy meaning that not many could meet their far too tight lending criteria and thus obtaining a mortgage was very difficult for most borrowers.

We started with these regulations meaning that many mortgage borrowers couldn’t roll over interest only periods even though they were experiencing the greatest jump in rates in a generation, but thankfully saw common sense start to prevail over time as banks managed to get some leniency as to how they were supposed to apply these rules meaning that most mortgage borrowers and property investors in particular can now extend interest only terms if they have a requirement to.  

I’m not one to give the Reserve Bank credit for much considering the inflationary mess we still find ourselves in, but they did time the relaxing of the loan-to value rules in June well. While this had very little effect on property investor activity (with the majority of those wanting to see how the October election would play out) first home buyer activity started to increase off what had been a very low base.

I noticed at speaking events around the country that property investors were still turning up to these engagements and watching intently but it was apparent that in most cases were wanting some certainty as to who would lead the Government moving forward before being willing to invest further. This comes as little surprise with the outgoing Government easily being the most anti-property investor of any in recent history.

At this time last year, the mood in general felt more buoyant which I partially expect was down to that many still had not experienced their mortgages coming off the very low interest rates we experienced on the back of Covid and thus having more money to spend. It was clear, however, for those who watch interest rates that the Reserve Bank had a way to go before inflation was tamed and so that interest rates would be going higher. I think we finish this year with the opposite, the general mood is down as the Reserve Bank’s monetary tightening has pushed the economy into a recession and it is not unusual at present to see articles of business failures, job losses or property development failures. On the other hand, I think that the property market faces a much better 2024 than what it had this year and we are more likely to experience mortgage rate drops rather than rises over the next 12 months.

Kris Pedersen
December 2023