Real estate agents in Hamilton say sanity is returning to the housing market as banks pull preapprovals.
House prices in November continued to increase across the country with the national median price rising to $925,000, according to Real Estate Institute of New Zealand data. The national median price excluding Auckland was $775,000, a 26 percent increase on a year ago.
And in Hamilton prices broke another record jumping to $881,000 from just $829,000 in October.
But Lodge Real Estate managing director Jeremy O'Rourke says things are changing.
O'Rourke says at a recent auction four of the five bidders had their bank preapprovals removed on the day.
He also says fewer homes are selling under the hammer, with prices instead being negotiated after failing to reach set reserves. Only one-third of homes at Lodge's December 8 auction sold under the hammer.
It comes after a flurry of changes in recent months which are impacting Kiwis' ability to get a mortgage. That includes higher interest rates and changes to loan-to-value restrictions meaning fewer buyers will be able to secure a mortgage with less than a 20 percent deposit.
In response to the changes, some of the country's biggest banks started pulling pre-approvals for borrowers with a deposit less than 20 percent. A preapproval is an acknowledgement from a bank someone can borrow an agreed amount.
"There's still plenty of confidence in the Hamilton real estate market but there is a definite change happening. It's a tough market to get your head around because there are so many variables in place," O'Rourke says.
His comments come after Treasury predicted house prices will increase more than 10 percent in 2022 - after a 29 percent rise in 2021.
Treasury's latest economic and fiscal update, known as HYEFU, shows house prices are forecast to increase 10.4 percent next year, meaning the median house price will rise to more than $1 million.
And it could be even worse. In Treasury's Budget update in May, it forecast house prices to rise by 17.3 percent, but its latest update shows prices went up by 29 percent. That means the 10.4 percent increase tipped for next year could prove to be a major underestimation.
The 29 percent increase was the fastest since the 1980s. It occurred despite near-zero net migration and booming residential construction activity that increased supply.
But ASB Bank's latest data predicts a small drop in house prices late next year.
In a report earlier in the month, ASB said it's forecasting house prices will experience a cumulative fall of four percent next year.
"We now expect small falls in house prices over the second half of 2022. Given the perils of house price forecasting, the cumulative forecast fall of around four percent should be interpreted more as a hat-tip to the risk profile than a precise point forecast," the report reads.
"It's also tiny in the grand scheme of the 35-40 percent surge in house prices since March 2020."