What’s in store for the Auckland housing market in 2022?
It’s no secret that New Zealand’s property market has been incredibly hot in recent years. Low interest rates and Kiwis being forced to stay at home meant property purchases became a logical step for many, creating a fast-moving seller’s market.
Nowhere has this been more obvious than Auckland, with the average asking price in the City of Sails shooting up 22% year-on-year by December 2021, reaching $1,253,600, according to Trade Me Property.
So, with this in mind, where should we expect the Auckland property market to go in 2022, and what should buyers be looking out for?
1. Some cooling of the market
All five of New Zealand’s major banks have now come out with predictions that they expect to see some slowing in national property prices over 2022. For example, ANZ has called this drop at around 4%, having previously stated they expected the market to remain flat over the year. They put this down to more stringent LVR restrictions, weaker sales and the introduction of new consumer lending protections.
Importantly, however, ANZ notes that this drop would only reduce house prices to the level they were at in September 2021, which was far higher than they were only a matter of years ago. They’re also keen to point out that the incredibly strong labour market means that overall economic momentum is unlikely to be significantly diminished by this slight reversal of recent trends.
Of course, these trends won’t be felt uniformly across New Zealand. Interestingly, CoreLogic has recently updated its Vulnerability Index, which rates regions according to their likelihood of experiencing a property downturn. As part of this update, Auckland’s index has been revised to slightly less vulnerable compared to where it was sitting in October 2021.
2. The impacts of new legislation
2021 saw the introduction of two important pieces of property legislation. One was the bright-line test extension, a change that increased the period during which a sold investment property incurs high income tax on profits from five years to ten. The second was the limitation of interest deductibility.
This second law prevents investment property owners from offsetting their mortgage interest costs on existing residential properties through tax reductions. This applies to any purchase of an existing residential investment property that took place on or after 27 March, 2020. For properties bought before this date, there will be a phased restriction of interest deductibility over the next four years, resulting in its eventual total removal.
However, this rule doesn’t apply to new builds (properties that received their code of compliance certificate on or after 27 March 2020) which will be exempt from the new interest deductibility rules for 20 years, and also from the bright-line extension.
This means that new builds are likely to be in greater demand among investors compared with existing homes.
3. A new build boom?
In fact, the tail end of 2021 was already beginning to bear out the idea that new builds are increasing in popularity.
StatsNZ reported that the year to September 2021 saw a 25% increase in the actual number of new dwellings consented across the country. Auckland itself was ahead of this trend, with 19,886 new dwellings consented, up by 29% year-on-year.With new builds shaping up to be a solid investment option in 2022, take a look at property and land packages offered by Golstruct Homes. If you have any questions, get in touch with our expert team.