“The latest figures from the Real Estate Institute of New Zealand (REINZ) for May 2023 indicate encouraging developments, following the Reserve Bank’s announcement of relaxed loan-to-value restrictions and stabilising interest rates,” reports Director of City Realty Group, Daniel Horrobin.
Daniel goes on to say “Although the total number of properties sold across New Zealand saw a slight year-on-year decline of 0.4%, there was a remarkable 30.0% increase in sales volumes compared to the previous month. In Auckland, sales volumes were down by only 4.2% year-on-year, but the month-on-month surge of 37.8% indicated a notable recovery reflecting a growing confidence among buyers.”
“Our own Auckland Central office, now comfortably housed in our smart new premises at 246 Queen St, for June enjoyed our best month of sales activity for at least a year,” reports a delighted Daniel.
“Our auction floor is a barometer of the larger market and June saw 81% of the 16 properties in total sold with 51 bidders and over 200 bids taken”.
This despite stock levels in Auckland of residential properties for sale decreasing by 9.1% compared to the same period last year, leading to a reduction in available options for buyers.
“Our Auckland central apartment market reflects the same trend with an end of June total of 520 CBD apartments appearing for sale on Trade-me. Compare this to 724 a year ago in May 2022 and that is a 30% drop in available properties,” says Daniel.
On a positive note, buyer sentiment is shifting positively, as revealed in a monthly survey conducted by Tony Alexander in collaboration with REINZ. A net 55% of residential real estate agents reported an increase in first home buyers entering the market, the highest reading since the beginning of 2021. Additionally, a net 32% of agents noted an increase in the number of people attending open homes, another positive trend not seen since early 2021. Furthermore, concerns about falling prices are easing, with 49% of agents observing fear of overpaying, compared to 60% – 70% in early 2022.
Further good news is that, on the back of the announcement by the Reserve Bank of a flat official cash rate of 5.5% for the foreseeable future, it appears that mortgage rates have likely reached their peak. Lending data also indicates a trend of borrowers opting for shorter fixed-term periods, reflecting an expectation of rate falls over the next 2-3 years.
“There is still some pain for some as mortgage fixed terms end and the resulting new interest rates compound with inflation pressures,” warns Daniel.
The rapid growth in New Zealand’s population is another significant factor impacting the housing market. Net migration for the year up to April shows a gain of 72,300 individuals, surpassing the previous migration peak experienced last decade. Projections suggest a net gain of 95,000 to 100,000 individuals this year, contributing to the stabilising and subsequent upward pressure on property prices.
Further to that, to quote Tony Alexander: “proportionately more immigrants will settle in Auckland than the rest of the country”.
This is resulting in further demand on an already tight rental property market, in particular in Auckland where rental listings are down 36% year on year placing upward pressure on rents.
The median weekly rent In Auckland has increased by 8.3% year on year with apartments seeing the biggest increase of 12% year on year.
“In a nutshell” says Daniel “the forecast is cautiously optimistic with several positive factors contributing to this sentiment. These factors include stabilising prices, heightened buyer activity, the peaking of mortgage rates, the strength of the job market, a surge in migration, and the easing of credit conditions, such as loan-to-value ratios (LVRs).”
“We still have an election to navigate” adds Daniel. “It is anybody’s guess what will happen in that space.”