Property market is “not too hot, not too cold”
New Zealand's median property price has now increased for six consecutive months, but is still 10.4% below the 2021 peak, according to CoreLogic.
The national median climbed another 0.5% in March, after rising 0.3% in February, 0.4% in January, 1.0% in December, 0.7% in November and 0.4% in October.
CoreLogic Chief Property Economist Kelvin Davidson said that while prices were growing, they were doing so slowly, which was only to be expected given stretched housing affordability.
“New Zealand's housing market can probably be described as not too hot, not too cold,” he said.
“High mortgage rates remain a big challenge at the forefront of all borrowers’ minds, whether they’re taking out a new loan or repricing an existing mortgage. While the new tax year and 80% mortgage interest deductions will help cashflow for property investors, it's unlikely to be enough to trump high interest rates.”
Mr Davidson also said that while New Zealand was getting closer to the start of a ‘loosening cycle’ for the official cash rate, the first rate cut was unlikely to happen imminently.
“Indeed, if the Reserve Bank’s current projections prove to be correct, the cash rate may not start to fall until next year, highlighting that shorter-term fixed mortgage rates may not drop much for at least another six to nine months,” he said.
“We’ve also seen a turnaround for listings activity in the first few months of 2024, with a good flow of fresh properties hitting the market, raising the choice for buyers and taking a bit of heat out of property prices. There’s no set definition, but the general sense is that the so-called sellers’ market of late 2023 has now switched back in favour of credit-approved purchasers.”
Market expected to keep treading water
Mr Davidson said New Zealand's property market was likely to remain lukewarm for the foreseeable future.
“March’s subdued property value data is a timely reminder that this upturn may well be inconsistent from month to month, and across regions,” he said.
“Certainly, although house sales volumes are now trending higher, they’re coming off a very low base, and activity remains well below normal. In that environment, it’s no surprise that value patterns are also a bit patchy.”
Mr Davidson also said that while first home buyer activity was strong, investor activity was weak.
“Sales volumes remain on track to rise by about 10% this calendar year and property values by perhaps 5% nationally – decent figures, but slow by past standards,” he said.
Given Mr Davidson’s analysis, this might be a good time to buy. So price growth is limiting buyer competition, while interest rates may start falling next year. Please refer your clients to me if they’re thinking about buying, so I can help them get a great loan.