New Zealand Housing Market Experiences Soft Start in the First Quarter of 2024

Date Published: 5 April 2024

Key Facts

• The New Zealand housing market saw a soft start in the March quarter, with CoreLogic’s House Price Index rising by 0.5% in March.
• The average property value across New Zealand is now at $934,806, an increase of 3.2% from September’s trough, and 10.4% below the recent peak.
• Major cities such as Wellington, Christchurch, Dunedin and Auckland showed gains, whereas Tauranga and Hamilton saw a decrease in property values.
• High mortgage rates are a significant challenge for borrowers, and the Reserve Bank’s current projections suggest the cash rate may not start to fall until next year.
• New listings in the first few months of 2024 are increasing, leading to more options for buyers and a potential reduction in property prices, indicating a shift towards a buyers’ market.
• The regional house price index results for March showed variable growth, with some regions posting gains of around 1%, while others saw drops.
• Despite the challenges, property values are expected to increase by about 5% nationally over the calendar year, with sales volumes expected to rise by around 10%.

Article Summary

The March quarter marked a subdued beginning for the New Zealand housing market, as per the latest CoreLogic House Price Index. The index rose 0.5%, taking property values to 1.1% higher in the first quarter of 2024. However, the average property value across New Zealand, now standing at $934,806, remains 10.4% below the recent peak. Notably, there were significant regional variances with Wellington and Auckland seeing moderate gains, but Tauranga and Hamilton experiencing marginal drops.

The softer results at the national level were anticipated, given the stretched housing affordability. Higher mortgage rates stand as a significant hurdle for both new and existing borrowers. Despite recent tax changes and the new mortgage interest deduction rules providing a boost to property investors’ cash flow, it is unlikely to outweigh the impact of high interest rates. Additionally, the possibility of an official cash rate cut in the next cycle is not imminent, indicating mortgage rates may not significantly drop for another six to nine months.

The real estate market saw increased listing activities in early 2024 with more properties becoming available. This increase has led to more options for potential buyers and has turned the market favourably towards credit-approved purchasers. However, the performance has varied across regions with some experiencing growth, while others saw a drop in property values. Such variation is expected even in times of widespread market boom.

Going forward, the housing market will continue to face challenges. The inconsistency in property value data suggests that the upturn will fluctuate monthly and across regions. Nevertheless, first home buyers have continued to target the market successfully, contributing to property values expected to rise by 5% nationally, with a projected 10% increase in sales volumes this calendar year, despite slower than normative property industry performance.

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