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New Zealand Housing Market Trends

1 Nov 2023

New Zealand Housing Market Trends

When we look at real estate trends, we look both forwards and backwards. Based on what has happened in the housing market over the past year or two, what can we identify as upcoming trends?

How have interest rates moved, and how are they trending? What has happened to house prices in NZ recently, and what predictions can we make? What else is happening in the economy that might influence the New Zealand property market?

Exploring the New Zealand Housing Market

As we've detailed in another piece about the Factors that Determine Residential Property Value, the New Zealand housing market is influenced by several factors.

Economy and Inflation

In April 2023, the Reserve Bank increased the official cash rate (OCR) from 4.75% to 5.25%. Banks responded by lifting their interest rates – currently, some fixed term rates are getting close to 7% and floating rates are up around 8%.

Climbing interest rates create cautious buyers. The cost of borrowing is higher than it was a year or two ago, so buyers are carefully considering whether they can afford mortgage repayments if interest rates rise even further.

High interest rates and high inflation create a tightening of the economy. With inflation hitting us at 6.7% (the consumer price index rose 1.4% in the December 2022 quarter), we're spending less and worrying more about income security.

All of these economic factors drive (or restrict) buyer demand for housing.

House Price Trends

House prices in New Zealand peaked in November 2021 and many people predicted that at some point they'd have to slow down. And they were correct.

Since the peak, Wellington house prices have come down by approximately 25% since the end of 2022.

At Lowe & Co we're constantly looking at the long game, and we see this peak and fall as a natural levelling out of the market. Even with this unsustainable rise and the subsequent decline and correction, the national average house price is still approximately 20% higher than pre-Covid levels.

Housing Availability

House sales have slowed down over the past year. One source calculates a 36.1% drop year-on-year from November 2021 to November 2022.

We've moved from a situation in 2021 where demand outstripped supply and there wasn't enough available housing, to a more settled market.

Some owners are even finding themselves in a situation of negative equity, considering whether to sell up and release themselves of overstretched debt. If so, we may see more properties available for sale.

Housing Affordability In New Zealand

As we get closer to our NZ election date 2023, we'll hear more and more from our politicians about housing affordability in New Zealand. Housing will be a hot topic on the campaign trail, so we'll be watching that closely.

If we have a change of government, policies to curb property investor activity (i.e. interest deductibility on rental properties) may be lifted. This will affect whether investors re-enter the market, which in turn, may influence housing prices in NZ.

The Wellington market, in particular, is often affected more than other regions by pre-election uncertainty. Buyers and sellers alike often take a “let’s wait and see what happens” approach in the lead up to voting day. In turn, the usual Spring lift in listings could be delayed until after election day, 14 October 2023.

Recent Developments in New Zealand's Property Market

As housing sales slow down because of the factors discussed above (rising interest rates, cautious borrowers, talk of a recession), the average time to sell is increasing. Properties are on the market for longer, and there is more housing stock for buyers to choose from.

What Lies Ahead for New Zealand's Property Market?

It's important, then, to have a real estate team working with you to help you make the most of these market factors.

In a market such as the one we find ourselves in currently, it's even more important that you work with a team who prioritise strategy, and will recommend which selling strategy is likely to get you the best result within the quickest timeframe.

Will interest rates rise or decline?

At the time of writing, there were estimates that the OCR would continue to increase, possibly hitting 5.5% later in the year.

It's very likely, then, that the banks' interest rates will continue to climb. Some are estimating that floating rates may get as high as 10%. We think that might be too aggressive, but it is still possible that we will continue to see an increase in floating and fixed rates in the coming months.

We will continue to monitor announcements from the Reserve Bank and share those insights with you.

Is It a Good Time to Purchase a Property In New Zealand?

With prices settling down, it's a great time to purchase property in New Zealand – as long as you can service your debt smartly. The experienced team at AndCo Mortgages, our sister company, can help you calculate a realistic budget and find a property within your borrowing capacity – now and in the future when interest rates may continue to rise.

With our comprehensive knowledge of the Wellington property market, we can help you select an area that suits your lifestyle and your budget. And if you already own property, we can help you navigate how to use that equity to purchase an investment property.

At Lowe & Co, it is our job and our passion to stay up to date with New Zealand housing market trends and forecasts. Whether you're thinking of buying or selling, talk to the Lowe & Co team today.

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