Q&A: Construction crunch, mortgages, house prices - Anne Gibson and Tamsyn Parker answer your questions

Mortgage arrears rose sharply in January to a near three-year high, according to data from credit bureau Centrix. Photo / Alex Burton

If you needed proof that New Zealand’s housing market is cooling, insolvency expert Damien Grant has it.

“Building and construction liquidation numbers lead the pack over other industries, making up nearly a third of the total liquidations for January and February 2023,” Grant, a director at Waterstone Insolvency, said in a recent newsletter.

“This is likely a result of the cooling property market and we may see this ratio continue to grow in the upcoming months.”

The latest building company to cease trading is Bayside Designer Homes, leaving nine Auckland housing sites unfinished. It followed hard on the heels of KBL Joinery, a 49-year-old Auckland firm with 28 staff which went into liquidation on Monday.

This isn’t a new trend: 283 building companies had liquidators appointed between January and November last year - a statistic that had National’s former construction spokesman Andrew Bayly ringing alarm bells back in December.

“My belief is that this is only a sign of worse things to come,” Bayly said at the time. “I describe the situation of the building and construction sector that employs 295,000 people as that of riding on a surfboard on the front of a wave. The only question is whether the board will hit the sand or if we find a way to surf out of the wave.”

Mortgage pain

At the other end of the housing equation, homeowners are dealing with their own upheavals.

In February, the Reserve Bank delivered its 10th consecutive official cash rate rise - up 50 basis points to 4.75 per cent - and maintained its forecast that the OCR would peak at 5.5 per cent.

That means mortgage rates could rise further, hitting households already stretched by record-high food and fuel prices. As of December 2022, the average rate being paid by mortgage holders was 4.35 per cent, according to Reserve Bank figures. Today, all the major banks are offering one-year fixed home loan rates north of 6.50 per cent.

A Westpac analysis on February 28 calculated that many Auckland mortgage holders could be paying $900 per fortnight more than they were at the lower rates.

There’s evidence Kiwi households are already hurting, with mortgage arrears rising sharply in January to a near three-year high, according to data from credit bureau Centrix.

House prices

As interest rates rise, house values fall. The latest QV House Price Index for the three months ended February was down 2.7 per cent on the previous three months, and down 12.6 per cent on the year earlier.

The average national house value dropped to $920,366, with Auckland, Wellington and Rotorua recording the biggest falls.

Still, noted QV spokesman Simon Peterson, values are still well up on pre-pandemic levels.

“If residential property values continue to fall at their current rate, it could still take up to two more years to hit their pre-pandemic level nationally. That’s a pretty big ‘if’, with the market expected to stabilise before then.”

So, a glimmer of hope despite the building company failures and rate hikes? We asked Herald property editor Anne Gibson and personal finance editor Tamsyn Parker to give their take in a live Q&A with subscribers this morning.

• Thanks for your questions - we’ve now closed submissions so Anne and Tamsyn can get back to reporting.