No-one likes to buy something then see it fall in price straightaway.

Housing markets move in cycles, and we have just witnessed the biggest and most unusual upward leg of the cycle that any of us can remember. Instead of falling 10% as was commonly expected when we learnt that we were being plunged into a global pandemic with closure of international borders and lockdowns, prices rose by over 40%.

They soared because interest rates were cut to record lows having already been slashed in 2019. Also…

• Lending rules were greatly relaxed.
• Money was printed by the Reserve Bank and some $53bn of excess money went looking for an investment home.
• People focussed on their immediate living environments, partly using funds no longer able to be spent on offshore travel.

Forces began to gather which would eventually cause prices to start falling. I expected those falls from the middle of this year. Instead, they started at the turn of the year with the biggest shock factor being the caution induced in bank lending by changes to the Credit Contracts and Consumer Finance Act from December 2021.

Other factors in play included the following.

• Fixed mortgage rates quickly jumping between 2% and 3%.
• Reopening of the borders this year diverting spending back to offshore travel and raising talk of a brain drain across the Tasman.
• Tightening of Loan to Value Ratio restrictions last year in February, May, and again in November.
• Tax changes dissuading investors from buying more property.

When will the bottom of the cycle be reached? Because of the intensity of the credit crunch and the speed with which mortgage rates are rising, the low-point may well come towards the middle of next year. After that a flat period of very uncertain length of time is likely before the next cyclical upturn inevitably comes along.

For vendors the environment has changed tremendously. Fewer people are attending auctions and open homes and FOMO (fear of missing out) has essentially disappeared. It has been replaced by FOOP (fear of over-paying). Buyers have stepped back not just because of the factors cited above but because they feel now no sense of urgency.

In fact, one thing set to happen is that many buyers will actively look for reasons not to make a purchase. They might focus on talk of an over-supply of property, or the brain drain to Australia in particular. They will also speak in terms of waiting for the bottom.

But none of us have displayed an ability to predict the timing of cyclical highs and lows, and for buyers the incentive is not to focus on price but on property attributes.