What does 2024 have in store for the property market in New Zealand?
February 2024

What does 2024 have in store for the property market in New Zealand?

The most recent numbers are in and it seems that the New Zealand property market is starting to make its comeback after a quiet 24 month period. 

According to REINZ, figures from December show ‘a notable increase in sales activity, median prices lifting, lower days to sell, and a clear sense of more confidence overall (year-on-year).' 

This comes as good news to property owners nationwide, particularly for the rural sector off the back of what Peter Newbold, General Manager for PGG Wrightson Real Estate, said was one of the toughest he had seen for a long time. 

“There’s just been so many different things that have been hitting that sector,

“When you look at interest rates, inflation, approaches by the banks, farm gate prices and the like, it’s been a very challenging year on many fronts.”

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Peter Newbold, General Manager of PGG Wrightson Real Estate.

While the property market is influenced by various factors, the change in government last year will certainly impact on activity, with a number of policies being either reversed or reinstated. 

These include the repeal of the non-interest deduction rules regarding mortgages, reduction of the timeframes around Brightline taxation, reintroducing the no-cause eviction ban regarding residential tenancies, removal of the Reserve Bank dual mandate and the potential repealing of the Credit Contracts and Consumer Finance Act that came into force on the 4th of May 2023. 

There’s no way to accurately predict what impact this will have on the property market, but these policy changes will mean first home buyers are likely to face more competition for houses, with confidence returning to investors. Although CoreLogic’s chief property economist Kelvin Davidson says he doesn’t think investors will rush back into the market

“High interest rates and low rental yields are leaving many investors to make a weekly cash-flow loss on their properties as they typically spend $300-$400 each week paying off their mortgages.”

Independent economist Tony Alexander says he thinks prices will jump by up to 10 per cent over the next 12 months, attributing the highest population growth in decades putting pressure on the housing sector. And with the number of building approvals for new homes steadily dropping since October 2022, it’s pretty clear what it will do to the price of property.

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However Kiwibank’s chief economist Jarrod Kerr has a slightly more reserved forecast of house price gains, somewhere between 5% - 7%. He’s also putting this down to demand outstripping supply (citing record migration numbers playing a big role) and it’s something he doesn’t see coming to an end in the foreseeable future.

REINZ Chief Executive Jen Baird says that while there is some regional variation in December’s monthly House Price Index report, it’s clear that the property market ended the year on an encouraging note. 

“As well as the lift in year-on-year measures such as sales and drop in Days to Sell, the Housing Price Index is 0.5% higher compared with a year ago, and that provides a clear signal that the market is moving into more positive territory.”

Which is something Newbold agrees on. 

“Confidence is a key driver in the real estate market which is something that we haven’t seen a lot of recently. However there are ‘greenshots’ appearing which when combined will provide the necessary stimulus for the market to continue to build momentum.  The housing market is already showing an improvement in confidence and if we look at the rural market, and in particular the dairy sector, there has been some recent increase in sales activity across the country.” 

Blog - property market 2024 - cows

With inflated interest rates still holding firm, things are tight for many Kiwis across the board. Particularly those trying to save for a deposit, and earning a salary to cover high repayments. But Ed McKnight from OneRoof sees relief in sight, predicting interest rates to have fallen noticeably by October, with inflation falling and optimistically sitting between 2.5% and 4% by July. And Alexander agrees. 

“At some point the Reserve Bank will capitulate. But we may be months away from that. Until then we are likely to see just a small tweaking downward of mortgage rates before some strong reductions occur maybe towards the middle of the year as a current best guess.”

Alexander’s cautious advice for borrowers at the moment, saying that if he was borrowing, he would either float and wait for lower rates, or do what he tends not to favour because of the hassle, and fix for just six months. 

Some experts are also predicting greater housing supply coming to the market. In fact, Davidson says that perhaps more investors could be looking to sell homes, due to the bright-line test being reduced from 10 years to two years - meaning they can avoid paying capital gains tax.  

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With plenty of predictions being hashed out by ‘those in the know’, many property owners will be asking themselves one question - if this is the year to sell. Of course, this is never a simple ‘yes or no’ answer, but the signs are certainly pointing to a significant rise in movement over the next 12 months.

“Looking ahead, although interest rates and other economic factors continue to influence the market, many buyers and sellers are increasingly positive. 

“There are higher levels of enquiry from potential buyers and sellers across the country, which will boost market activity further through summer. These factors, combined with the drop in the number of listings, are expected to boost demand, along with the potential return of investors to the market as the government moves to change regulation impacting that sector.

“All up, we anticipate that activity will continue to pick up as the new year gets underway,” says Baird. 

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