CoreLogic’s chief economist highlights five recent data points on the residential property sector.
Affordability improving: There’s been a decrease in the percentage of median household income needed for new mortgages, now at 46%, down from 56% in 2022-2023. Auckland (49%) and Wellington (40%) have seen significant improvements, although rental affordability remains challenging at a record 28% of income. Wellington has a strong claim to being the most affordable main centre.
Shift in mortgage trends: RBNZ figures show just 10% of new loans taken out in January were fixed for over a year, with most borrowers opting for shorter terms to capitalise on low rates. Next month’s data may reveal whether more borrowers are shifting to longer fixed terms.
Net migration levelling off: After fluctuations, net annual migration is stabilising around the low 30,000s, potentially preventing significant rent increases but not necessarily spurring growth.
Inflation under control: Stats NZ data indicates contained inflation, with food prices rising slightly (2.4% in the year to February). Rent data was not available due to methodology changes.
Economic recovery signs: Anticipated Q4 GDP growth of 0.5% suggests economic recovery, following previous declines, supporting the outlook for a modest property market upturn in 2025. **Since this article was published, the latest GDP figures were released, with growth of 0.7% for the December quarter – a surprise on the upside (economists had expected growth of between 0.4% and 0.5%). Read more on that here: Economy rebounds out of recession more sharply than expected | RNZ News
Our view: It was certainly encouraging to hear yesterday that the economy has rebounded from recession. While challenges around the cost of living remain, this shift signals positive momentum for the country, with reports of growing optimism in the market. The next OCR announcement is on April 9—let’s see where it takes us.
Residential auction activity continues to decline from its late February peaks (Source)
Auction rooms remain busy around the country, but the number of auctions continues to fall from the late February peak.
Interest.co.nz reports 441 residential auctions between March 8-14, down from 557 in the first week of March and from 601 in the last week of February.
But the sales rate hasn’t changed, with 165 properties selling under the hammer at the latest auctions, giving an overall sales rate of 37%.
Buyers remain cautious, with just 36% of the properties that sold at the latest auctions achieving prices that were above or equal to their rating valuations. Buyers were price sensitive in Auckland in particular, where just 28% of the selling prices met or exceeded rating valuations.
Our view: Vendors understand that as interest rates decline, more buyers will enter the market, potentially driving prices higher over time. If they are in a position to hold onto their property, they may choose to wait in hopes of achieving a price closer to their expectations.
Here's how much more renters are paying since Covid (Source)
New Zealand's median weekly rent has risen by 25% from $510 to $640 in the five years since Covid hit, according to Trade Me's latest Rental Price Index.
This increase has outpaced wage growth, up from an average $33.14/hour in March 2020 to $42.57/hour by December 2024. The rent-to-income ratio has reached a record 28%, up from 26.4% five years ago and 25% a decade ago, indicating greater financial pressure on renters.
Regionally, the Bay of Plenty was the most expensive region, with a median weekly rent of $680, while Wellington and Auckland saw rents rise to $665 and $660, respectively. Reasons for rent rises in those places include population pressure, limited rental supply, and interest rates.
The findings come after CoreLogic data recently showed the nationwide median rent to median household income ratio is at 28% compared to 26.5% five years ago.
Borrowers finding certainty in home loan 'rate war' (Source)
CoreLogic says home loan borrowers are probably deciding now is the time to make the jump and fix for longer, says CoreLogic.
February saw the mortgage market "burst into life" with a "rate war" competition for three-year rates, and then two-year rates, its chief property economist Kelvin Davidson said. There was likely to be more market activity this year, both in terms of sales and people refixing their home loans.
And although prices are expected to lift this year, Davidson said the market was unlikely to see an immediate switch in power from buyers to sellers.
"The stock of listings available to purchase is currently at its highest level for this time of year since at least 2018, which means buyers can still take their time to try and achieve a deal in their favour.
"For investors, lower mortgage rates will make new property purchases more affordable, which have required significant top-ups from other income sources over the past couple of years."
Davidson said 2025 was likely to bring a subdued upturn in the property market.
"We're just at the beginning of seeing the first clear signs that the downturn in property values has come to an end."
Our view: Yesterday it was reported that the major banks cut fixed mortgage rates again. See this article here.
Buyer's market persists, but watchers expect house prices to rise (Source)
Commentators suggest prices could rachet up later this year, despite buyers being spoilt for choice.
Most market commentators expect house prices to rise by about 5% this year after a stagnant two-year period. Major banks like BNZ, Kiwibank, and Westpac predict modest growth of 5% to 7% as the market gradually recovers. Increased demand from lower interest rates is being offset by high new listings, with unsold homes reaching a 10-year high of 36,000. However, auction clearance rates are improving, signalling growing market optimism.
Interest rate cuts don't mean house prices are taking off, sellers told (Source)
Activity is picking up in the housing market, new data from the Real Estate Institute indicates. But some vendors are prematurely expecting falling rates to boost prices.
The number of properties sold last month increased 3.4% year-on-year and 59.5% compared to January, which was a quiet month for sales. However, some vendors are prematurely expecting falling interest rates to boost prices, despite a 1.2% drop in house prices year-on-year. Median sales prices were down 2.4% year-on-year.
While sales are struggling to keep up with new listings, some areas saw significant activity growth, like Waikato (+16.9%) and Taranaki (+20.6%). Investor activity was notable in Waikato. Inventory levels increased, and the median days to sell rose to 54 (although in Northland it reached 70 days). Just over a quarter of all properties sold for more than $1 million.
Auckland saw strong engagement from first-time buyers, owner-occupiers, and investors, but vendors’ price expectations were mixed. In Wellington, first-time buyers were active, but investors faced challenges due to local rate hikes.
Australian News
Housing affordability: Sydney, Melbourne apartment sellers hit with $70k losses (Source)
Over in Australia, home sellers earned a record $306,000 profit in late 2024, but loss-making sales rose to 5.2%, mostly in Sydney and Melbourne apartments. CoreLogic’s ‘Pain and Gain’ report showed losses often came from high-density buildings built between 2012–2019, with sales up to $63,000 below original prices. Meanwhile, houses in high-demand areas like Brisbane, Adelaide, and Perth remained highly profitable.
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Have an enjoyable weekend everyone.
From the team at Erskine Owen.
