The number of New Zealanders expecting house prices to rise has returned to 2020 confidence levels, as measured by the ASB Housing Confidence Survey. For the three months to December, a net 33% of respondents believed prices would increase and 23% considered it a good time to buy. However, expectations for falling interest rates slightly decreased from a net 57% to 51%, prior to the Reserve Bank's recent cash rate cut to 3.75%.
ASB chief economist Nick Tuffley notes inflation is under control and that there are favorable conditions for homebuyers such as falling interest rates, high supply, and subdued prices. Confidence in Canterbury rose significantly, with 38% expecting price increases, while overall buying confidence improved slightly from 20% to 23% nationally.
Despite this optimism, Tuffley observed caution among buyers, particularly in Auckland, and attributed the slower buying pace to the high number of homes for sale. He compared the current sentiment to the optimism seen in late 2020 and early 2021 during a housing market boom but noted potential concerns regarding inflation linked to global events.
Where houses might have given you a 1000 percent capital gain (Source)
CoreLogic has delved into the capital gains experienced by property markets around the country since 2000, revealing significant regional disparities.
The Mackenzie District leads with a remarkable 1,074% increase in median property prices since 2000, rising from $64,723 to $690,578. Invercargill and Central Otago both saw a 775% increase, followed by Waitaki at 745% and Queenstown Lakes at 699%. Among major cities, Dunedin experienced the highest growth at 500%, with Auckland, Wellington, and Christchurch seeing increases of 370%, 262%, and 348%, respectively. Overall, national median values rose by 380%.
Nick Goodall, CoreLogic's head of research, notes that lower starting prices in places like Dunedin have made property more accessible, resulting in higher yields for investors and more affordable mortgages for homeowners. While the compound annual growth rate for residential property was 6.5% over the past two decades, future growth is expected to slow to 3-4% annually due to factors like looser land restrictions and the inability to replicate past interest rate declines.
Signs aligning for house prices to rise in 2025 - economist (Source)
CoreLogic is picking New Zealand's house prices will begin to lift this year after a "deep downturn".
Its February housing chart pack showed increased activity last month among people who owned multiple properties and people who shifted home.
It also showed a small drop back in the market share of first home buyers to a quarter of the market.
With mortgage rates expected to fall in line with the OCR cuts, house prices were likely to rise, CoreLogic chief property economist, Kelvin Davidson says.
"There's a sense now that we might just be starting to turn around off the back of those lower mortgage rates," Davidson said.
He supports Reserve Bank indications for four to five percent growth in house prices.
"Even when it does arrive, four or five percent growth in house prices would still be relatively subdued compared to past upturns.” Davidson says.
'No huge upside' to house prices, Treasury economist says (Source)
Treasury doesn’t expect house prices to surge as interest rates fall, since the market has already priced in the expected decline in long-term mortgage rates.
In a lecture on Wednesday, Treasury’s chief economist Dominick Stephens said while lower rates reduce the risk of further price drops, they won’t lead to substantial increases, and the market now expected interest rates to remain higher than pre-pandemic levels, influencing what buyers are willing to pay.
While the housing market appears to be stabilising – with flat prices and increasing sales – Treasury was forecasting “low single-digit growth”, rather than a sharp rebound.
Moreover, limited land supply has historically driven prices up, even with falling interest rates. Recent zoning policy changes in cities like Auckland and Wellington aim to address supply constraints, potentially making housing more affordable and limiting future price increases.
Our view: The country has been experiencing a housing shortage for many years. Opening up more land may help with this, but at the end of the day, it’s important to remember that people tend to congregate in central areas where they are closer to hospitals, work and schools. This is why the rezoning occurred in cities such as Auckland and Wellington. Will it hold prices down, well, given building costs remain fairly high, chances are there are still not enough dwellings in central areas and therefore, demand for what is there will draw more buyers, especially as interest rates fall and more buyers enter the market. More competition has a flow on effect of…..that’s right, higher prices.
Build costs for stand-alone houses at a record high while construction costs of retirement village units and apartments plummet (Source)
In Q4 last year, the average cost of building a new home in New Zealand fell slightly to $3,245 per square meter, amounting to an average total build cost of $449,517 (excluding land) – according to Statistics NZ’s building consent data. This marks a decline from the previous quarter's record high of $3,285 per square meter, bringing costs back to levels seen at the end of 2023.
While costs appear to have stabilised after a period of rapid growth, it's too early to say if this trend will continue. The figures in interest.co.nz’s Residential Building Consent Analysis Tables show over the past 11 years, residential building costs have doubled, with notable variations depending on the type of dwelling. Standalone houses and townhouses reached record high average costs of $3,279 and $3,157 per square meter, respectively, while the average size of these homes has decreased from 212 square meters to 177 square meters.
On the other hand, costs for apartments and retirement village units have dived significantly, with averages of $3,364 and $3,342 per square meter, respectively—the lowest since 2021 and in 12 months, respectively. The article provides links to regional data.
The number of new homes being built in Auckland continues declining (Source)
The number of new homes built in Auckland last year fell 5.2% last year. Auckland Council issued 17,169 Code Compliance Certificates (CCCs) for new dwellings in 2024, down by 5.2% from the peak of 18,103 in 2023. Because CCCs are issued when a building is complete, they give a more reliable indication of new housing supply than building consents – issued before construction starts.
So far, the decline in CCCs has not been severe enough to cause a shortage of new homes. But if the decline in the number of homes being built continues, and current indications are that it will, then a shortage could develop at some stage in the future.
Of course, that’s also dependent on Auckland’s population growth, which is in a period of change, so there’s uncertainty about how well the supply of new homes in the Auckland region will match demand created by population growth in the years ahead.
Our view: This speaks to lack of supply in Auckland, which, as the article alludes to, could lead to a housing shortage if the trend continues. Given we have never really managed to overcome the housing shortage in the past, it would be easy to assume that this time will be no different and, if so, the demand for existing housing will increase and the competition will once again deliver a lift in house prices. Timing is the one anomaly not addressed in this situation. Let’s see how things shape up by the end of the year.
High level of auction activity as the market hits peak selling season (Source)
Almost 500 properties went to auction last week (February 15-21), with 201 of the 496 residential properties up for auction across the country (41%) selling under the hammer.
Interest.co.nz monitors auction room activity and says 42% of those that sold fetched prices above or equal to their rating valuations. While the latest OCR cut would have been welcome news to buyers and vendors alike, indications are that buyers continue to drive a hard bargain on price, with the high level of stock on the market working in their favour. This is evident in the amount of time auctioneers are spending trying to negotiate a deal behind the scenes when bidding stalls.
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From the team at Erskine Owen.
