New homeowners are feeling the pinch, as house price drops and interest rate hikes cause uncertainty.
The Real Estate Institute [REINZ] monthly report showed Wellington region median house prices dropped by 20.2 per cent in the 12 months to December 2022.
Wairarapa-based financial advisor Carissa Fairbrother said because Wairarapa was included in Wellington statistics, that big fall in value did not reflect what was happening locally.
“Carterton over a 12-month period from December 2021 to 2022 was still positive, and other parts of the region certainly haven’t fallen as much as Wellington city.”
Masterton District’s median house prices dropped by 6.3 per cent and South Wairarapa dropped by 7.8 per cent in the 12-month period. Meanwhile, Carterton’s median prices rose by 15 per cent.
As of December 2022, Carterton’s median house price was $665,000, South Wairarapa was $770,000 and Masterton was $642,000.
With the housing market coming down, Fairbrother said homeowners with mortgages will feel the pinch over the next 12 months, and new homeowners need to check they can afford the repayments.
“It’s all about affordability for first-time homeowners. While the price of the houses will be more attractive, the cost of buying will be significantly higher, along with increased associated costs like insurance, utilities and maintenance,” Fairbrother said.
“They need to take a look under the hood and address their personal spending habits, as interest rates are more like 6.5 per cent.
“Whether they can curb spending or increase their earnings, the reality is that this environment has been constructed to make us stop our discretionary spending and batten down the hatches.”
Business owners are also on shaky ground, with many feeling the predicted recession looming.
The latest measure of business confidence from the Institute of Economic Research [NZIER] hit an all-time low in the final quarter of 2022, with 73 per cent of firms anticipating economic conditions to deteriorate during the year ahead.
NZIER said 13 per cent of firms reported a decline in activity over the past quarter, and a net 6.3 per cent of firms are looking to cut headcount in coming months.
Wairarapa’s retail spending has been rocky since Christmas, with Worldline recording a 21 per cent drop in Boxing Day spending compared to 12 months prior, and a 2.1 per cent drop in the first week of 2023.
Fairbrother said the spending drop is a reality check.