Tue. Sep 26th, 2023
    New Signs of Recovery in New Zealand’s Housing Market

    The New Zealand housing market, which has been in a slump for the past 18 months, is showing signs of a turnaround. According to Real Estate figures, house prices have fallen 16.1% since their peak in late 2021, and turnover has decreased by half since the end of 2020. However, economists from Kiwibank have recently stated that May was likely the trough for the housing market.

    There are several factors that have contributed to this change. One significant factor is migration, with forecasts predicting that New Zealand will see a net influx of 100,000 migrants in the coming months. This is expected to create a demand for 40,000 to 50,000 more houses, which can boost the property market.

    Looser credit criteria have also played a role in the market’s recovery. It has become easier to obtain a mortgage since June 1, when banks were allowed to lend 5% of their new loans to investor borrowers with 35% deposits, and 15% of new loans to owner-occupiers with 20% deposits. This change, combined with adjustments to the Credit Contracts and Consumer Finance Act (CCCFA) rules, has increased activity in the market.

    Despite interest rates being higher than they’ve been in years, they are not expected to rise significantly further. This factor has drawn people back into the market, as they believe that interest rates will not worsen significantly.

    The lack of new listings has also contributed to the market’s recovery. The number of people willing to put their houses on the market has decreased over the past year, reaching record lows. As a result, there is less inventory available, causing buyers to compete more for desirable properties.

    The strong labor market has also played a role in limiting the extent of the housing market downturn. With an unemployment rate of 3.6%, few people have been forced to sell their homes, giving potential buyers more confidence in making purchasing decisions.

    While there is cautious optimism about the housing market’s recovery, experts do not anticipate a significant surge in prices. Factors such as high prices, unchanged interest rates, and potential caps on debt-to-income ratios in the future are expected to prevent a sustained upturn. However, National’s policies, if they were to win the election, could potentially push prices up.

    Sources: Real Estate figures, Kiwibank, Corelogic, Realestate.co.nz