Property prices will continue to rise in 2021 - although at a considerably slower rate, according to an expert.
The wild trajectory of the New Zealand property market - which has seen house prices skyrocket to record levels this year - may begin to cool towards the end of the first quarter, says David Nagel, the general manager for Quotable Value (QV), a leading state-owned valuation and property services company.
"A shortage of listings, record-low interest rates, and the looming re-introduction of loan-to-value ratios (LVRs) means that the property market is in for a hectic summer yet," Nagel said in a statement on Monday.
However, he believes that when LVR limits - the size of a loan in comparison to the value of a property - are reintroduced from March, the property market will also slow. LVRs restrict how much banks can lend to low-deposit borrowers.
In late November, the Reserve Bank announced that subject to final consultation, it intends to restore LVR restrictions to previous levels from March 1, 2021.
"I'm predicting we'll see something more akin to 2019 levels of growth again, when prices increased by an average of 4-5 percent nationally, as opposed to the rampant double-figure growth that we've witnessed during the back half of this year," Nagel said.
However, this will offer little comfort to first-home buyers in Auckland and Wellington, the country's high-priced property hubs - but it may provide some respite for regional buyers.
New Zealand's economic recovery is also at the mercy of the ongoing pandemic. Although the country has not recorded a locally-acquired case since November - and COVID-19 continues to be caught at the border - there's no guarantee it will remain out of the community. If the virus does reemerge, further lockdowns could drastically set back economic progress - that instability translating to the housing market.
"As 2020 has taught us, anything can happen," Nagel said.
"But what we've also learnt this year is that New Zealand's residential property market is more resilient than many of us expected. While interest rates remain so low, it's difficult - but certainly not impossible - to fathom a scenario in which prices would fall dramatically.
"Until we address this country's chronic shortage of housing, and I have been pleased to see that Auckland is on the right track now with record numbers of consents and work on new builds, we're likely to have more buyers than we do houses, which is only going to keep prices up."
It has been a turbulent year for the property market, the country's chronic housing shortage compounded by a fast-growing population and Kiwi expats returning en-masse to escape the pandemic - leading to an increased demand for an ever-dwindling supply.
With low interest rates and the removal of LVR restrictions, more Kiwis have been able to enter the property market this year, contributing to the sky-high asking prices.
"With many Kiwis unable or reluctant to relocate overseas right now, this too is likely putting a strain on the market," Realestate.co.nz spokesperson Vanessa Taylor told Newshub earlier this year. "Everyone needs somewhere to live.
"COVID-19 has changed the way a lot of people work. I wouldn't be surprised if Kiwis want more from their homes and if where they want to live is changing as remote working becomes more widespread."
