Three Key Influences Projected to Drive Up New Zealand House Prices in 2024

Date Published: 11 January 2024

Key Facts

• The decline in the number of consents for new dwellings, dropping about 21% over the past year, is causing a reduction of new houses in the market. An estimated 30,000 consents may be issued this year.
• The surge of 129,000 people in net migration over the last year has led to an increase in housing demand, thereby intensifying the issues potential tenants face in securing accommodation.
• The expectation for interest rates to decrease this year will incite new home buyers to penetrate the market.
• As of April 1, investors will be able to deduct 80% of their interest costs from rental income when calculating tax obligations, which may lead to a slow reversal of the 2021 withdrawal of investor buyers.
• The potential increase in the unemployment rate to 5% could deter some people from entering the housing market.
• Gains in house prices are projected to be most significant in the cities due to net migration pressure.

Article Summary

Over the course of 2024, three main factors and a few minor ones are expected to push up house prices in the New Zealand housing market. Firstly, the supply of new houses is declining noticeably, as there’s been a 21% drop in the number of consents issued for new dwellings construction over the past year. This means fewer houses are being added to the market.

Secondly, a record net migration surge has driven up demand levels. In the past year, 129,000 more people coming into the country has exacerbated issues encountered by potential tenants in finding accommodation. This can encourage people to buy houses instead, consequently driving up demand and property prices. Moreover, it’s expected that rental growth will remain robust even if overall inflation slows down.

Thirdly, an expected fall in interest rates this year could prompt new home buyers to step into the market. This is a critical factor, especially following a period where house prices have been rising monthly since June. Additionally, from April, investors will be allowed to deduct 80% of their interest costs from rental income for tax purposes. This incentive can stimulate investor interest in the housing market.

Although minor factors include the removal of some rental properties to house returning foreign students and tourists and a potential rise in unemployment rate, the average pace of growth in house prices is predicted to heighten through 2024, particularly in cities due to net migration pressure.

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