New Zealand house prices are expected to see a turnaround in the upcoming year, with a projected 6% increase as a result of interest rate cuts implemented by the Reserve Bank of New Zealand, as indicated by a recent Reuters survey of property strategists. Despite facing significant interest rate hikes, the real estate market in New Zealand remains resilient, with home prices sitting just 19% below their peak in November 2021. This is a stark comparison to the over 40% surge witnessed during the COVID-19 pandemic.
The significant increase in interest rates from 0.25% to 5.50% between October 2021 and May 2023 did not result in a housing market crash, but rather acted as a stabilizing force in an overheated market. However, average house prices across the nation did witness a slight decline from their peak of NZ$800,000 in March to NZ$753,000 in July, according to REINZ data. The average forecast for this year predicts a 1.0% rise in house prices, a notable decrease from the 4.5% estimated in a previous poll. Forecasts vary from -4.0% to 2.5%, painting a mixed picture of the market’s trajectory.
Future Outlook
Despite the current sluggish momentum in the housing market, experts anticipate a revival in activity toward the end of this year and into 2025. Low mortgage rates are expected to reinvigorate the market, although challenges such as rising unemployment and a weaker economy still loom. The impact of lower interest rates remains uncertain, with the potential for quicker confidence restoration than predicted. Average house prices are projected to increase by 6.0% next year and by 5.0% in 2026, indicating a positive future outlook for the real estate market.
When questioned about the purchasing affordability for first-time home buyers in the upcoming year, the majority of analysts expect an improvement. The substantial declines in interest rates are anticipated to positively impact debt servicing costs for individuals, thereby enhancing overall affordability. Nick Tuffley, chief economist at ASB Bank, emphasized the potential benefits of decreasing interest rates on affordability, further reinforcing the optimistic forecast for the market.
While challenges persist in the New Zealand housing market, the anticipated interest rate cuts and subsequent effects are expected to drive a recovery in house prices and market activity. The resilience showcased by the real estate sector in the face of interest rate fluctuations indicates a promising future for both buyers and sellers in the coming years.