New Zealand’s Real Estate Market in 2023: A Tale of Two Halves
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19th Dec, 2023
The year 2023 has been an intriguing one for New Zealand’s real estate market, aptly described as a ‘year of two halves’ in CoreLogic’s Best of the Best report. The landscape of the country’s real estate underwent significant shifts during the year, with declining sale volumes and house prices characterizing the first half, followed by a noticeable rebound. In this article, we’ll delve into the key trends that defined New Zealand’s property market in 2023.
A Sluggish Start
The first half of 2023 presented a challenging scenario for the New Zealand property market. Sale volumes plummeted to their lowest levels in approximately four decades, reaching just 60,475 for the 12-month moving total in April. National property values also took a hit, declining by an additional 5% over the year.
Regional Variations
While the overall market struggled, regional variations were evident. Featherston emerged as the weakest performer, with property values plummeting by a staggering 16.6%. In contrast, Sunshine Bay in Queenstown experienced a more moderate annual growth rate of 6.6%, showcasing its resilience as one of the top-performing suburbs.
Auckland’s Priciest Suburb
Herne Bay in Auckland maintained its position as the most expensive suburb, boasting a median value of $3,161,400. On the other end of the spectrum, Cobden in Grey claimed the title of the most affordable suburb, with a median value of $258,200.
Mortgage Rates and Regulatory Changes
One of the significant factors impacting the property market in 2023 was the trajectory of mortgage rates. While rates had steadily increased from mid-2021 to late 2022, the rate of increase slowed down considerably in 2023. Additionally, regulatory changes played a role, with the Credit Contracts and Consumer Finance Act (CCCFA) rules easing from May 1st and loan-to-value ratio (LVR) rules relaxing slightly from June 1st.
Second-Half Resurgence
The second half of 2023 saw a reversal of fortunes for the property market, with sale volumes on the rise. However, experts noted that listing flows remained relatively low throughout the year, even as sales volumes began to increase. The percentage gains in sales were impressive, but the low base meant that these gains didn’t translate into significant increases in the number of deals.
Migration’s Surprising Impact
A surprising development in 2023 was the surge in net inwards migration to New Zealand. While this didn’t directly stimulate sales volumes or house prices, it did put significant pressure on an already constrained supply of rental properties. As a result, vacancy rates dropped, and rent prices started to accelerate.
House prices bouncing back, election result brings confidence
The New Zealand real estate market has been showing signs of growth recently, with asking prices on the rise for two consecutive months. In September, the national average asking price increased by 0.4 percent to reach $840,050, following a similar increase in August. While this figure is still 6.2 percent lower than the previous year, experts anticipate a surge in demand after the recent election, with a typical post-election boost of around 10 percent expected in November. The market is expected to benefit from the election result, as it brings much-needed certainty, instilling confidence in decision-making. Notably, prices in Wellington city have been on the rise, increasing by 1.4 percent year-on-year to reach an average asking price of $894,900 in September. However, high-density housing options, such as apartments, units, and townhouses, have experienced declines in prices, with Christchurch being the most affected, seeing a 16.2 percent drop in average apartment asking prices. Smaller houses, particularly 1-2 bedroom units, have also witnessed price reductions in Auckland and Wellington.
Looking Ahead to 2024
As the New Zealand housing market enters its next phase, experts are keeping a close watch on several factors. The labor market’s performance and the mortgage repricing process in 2024 will be crucial determinants of the market’s direction. Additionally, the new property-friendly government is looking to shorten the Brightline Test and reinstate full mortgage interest deductibility, potentially attracting more investment.
Conclusion
In summary, 2023 was indeed a ‘year of two halves’ for New Zealand’s property market. The challenges of the first half were met with resilience and a rebound in the second half. As we enter 2024, the market remains dynamic, with a range of factors influencing its trajectory. While subdued growth is expected, the property market continues to be a fascinating space to watch.
Frequently Asked Questions
How did New Zealand’s property market perform in 2023?
In 2023, New Zealand’s property market experienced a challenging start with declining sale volumes and house prices in the first half of the year. However, it rebounded in the second half with rising sale volumes.
- Which suburb in New Zealand was the weakest performer in terms of property values?
Featherston emerged as the weakest performer in 2023, with property values declining by 16.6%.
- What were the regulatory changes that impacted the property market in 2023?
In 2023, regulatory changes included the easing of the Credit Contracts and Consumer Finance Act (CCCFA) rules from May 1st and a slight relaxation of loan-to-value ratio (LVR) rules from June 1st.
- How did net inwards migration affect the New Zealand property market in 2023?
Net inwards migration in 2023 increased pressure on the rental property supply, leading to lower vacancy rates and accelerated rent prices in some areas.
- What can we expect for New Zealand’s property market in 2024?
Experts anticipate a more subdued upturn in 2024, with sales rising by around 10% and prices seeing growth of approximately 5%, which is below long-term average levels.
