November 2024 Property Market Update

Given the hectic nature of our day-to-day modern lives it’s easy to lose sight of the bigger picture, so I thought this month it was probably worth taking a top-down view of how the property market looks across NZ right now, and what might lie ahead in 2025.

First, although property sales activity has been rising at a reasonable percentage rate in recent months, the upturn started from a low level, and indeed volumes are still 10-15% below ‘normal’. And with agreed sales still relatively subdued, the usual seasonal lift in new property coming onto the market for sale has caused the stock of available listings to rise to at least a six-year high for the time of year. That has meant pricing power remains firmly in the hands of buyers.

In turn, it’s no surprise to see that property values remain pretty sluggish. The CoreLogic hedonic Home Value Index (HVI) recorded its eighth consecutive national fall in October, with the total decline over that period since February’s ‘mini peak’ now sitting at around 5% – not a major slump, but certainly an extension of the weak patch we’ve seen late 2021. Auckland and Wellington have been underperforming lately, with a touch more resilience in markets such as Christchurch.

Of course, what’s ‘bad’ for some (e.g. sellers) is great news for others, including first home buyers. Their share of property purchases has consistently been at around record highs of 26-27% for several months now, with a lot of FHBs tapping KiwiSaver for at least part of the deposit, as well as making full use of the low deposit lending allowances at the banks. Looking at new-builds has been another popular option, as well as a willingness to compromise on type/location for existing properties.

On the flipside, mortgaged multiple property owners (MPOs, including investors) remain quieter than normal, with a recent market share of around 22%; versus their long-term average of roughly 25%. That said, the latest figure has been slowing rising compared to 6-9 months ago, with hints that lower mortgage rates are enticing a few more ‘Mums and Dads’ back to the property market. Reduced deposit requirements and rising mortgage interest deductibility have played a role too.

Meanwhile, touching on other aspects of the property market – net migration has fallen quickly in recent months and this has seen rents flatten off (admittedly at a high level in relation to incomes), and elsewhere we’re also seeing the first signs that the long downwards trend in new dwelling consents has come to an end. That bodes well for housing supply in 2025.

Taking a quick look ahead, with inflation now under some kind of control and the economy still very weak, further cuts to the official cash rate look likely – starting with a 0.5% fall on 27 November, taking the OCR to 4.25%. This suggests that mortgage rates also have further to fall, although the size/speed of the declines may be less than we’ve seen so far. Thinking further ahead, there’ll come a time when people may start reassessing the current preference for short term fixed interest rates (e.g. six months) and possibly look at longer terms (e.g. 2-3 years). But that’s potentially something people will look at in 2025 rather than the near term.

For the property market itself, then, there are signs that the falls in mortgage rates are bringing the recent house price downturn to an end. But just because a downturn finishes doesn’t necessarily mean that a strong upturn suddenly begins. Indeed, with the unemployment rate rising and the restraint of caps on debt to income ratios for new mortgages lying out there on the horizon, any upturn in 2025 is more likely to be slow/steady rather than spectacular.