NZ residential rental market news, August 30

Prices will continue to decline, as will rates, but the downturn aids FHBs

Too long; didn't read? Here're this week's TLDRs...

July sees increased sales despite price declines

July 2024 saw increased buyer activity, with sales up 14.5% year-on-year. 
Listings rose, but the overall number of properties for sale decreased. 
Median prices fell 2.2% nationally compared to last year. 
Significant sales increases in Gisborne, Otago, Marlborough, and Southland. 
Seven regions experienced year-on-year price increases, led by the West Coast. 
Interest rate reductions are encouraging buyer activity. 
Inventory levels rose 32.3% year-on-year but slightly decreased month-on-month. 
Median Days to Sell increased slightly.    
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ANZ predicts further house price declines in 2024

ANZ’s Property Focus report predicts further house price declines in 2024. 
Prices may fall due to high interest rates, tighter credit, and economic uncertainty. 
ANZ expects the OCR to remain high, limiting any quick recovery in the market. 
Possible price stabilisation in 2025 as the market adjusts to economic conditions. 
RBNZ’s monetary policy will significantly impact future property market trends. 
Continued caution is advised for buyers and sellers due to volatile conditions.      
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ANZ predicts further house price declines in 2024. 

Average asking prices on Realestate.co.nz have decreased by $110,515 since February. 
Auckland saw a significant drop, with prices down by $143,000. 
This decline reflects broader market adjustments and buyer caution. 
Lower demand and increased listings contribute to the price drop. 
National asking prices are also affected by rising interest rates and economic uncertainty.     
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Housing market weakens; cautious recovery expected in 2025

The housing market continued to weaken in July, with the REINZ House Price Index down 0.6% month-on-month. 
Sales volumes rose slightly in July, but overall activity remains subdued. 
Mortgage rates are falling as the RBNZ begins its easing cycle, but strong headwinds persist. 
House prices are expected to stabilise by the end of 2024, with a gradual recovery forecasted for 2025. 
Economic uncertainty and rising unemployment may weigh on buyer confidence. 
ANZ advises caution in fixing mortgage terms due to ongoing rate adjustments.    
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Potential house price boom, caution advised

Economist Tony Alexander suggests another house price boom is possible but not guaranteed. 
Factors influencing this include the RBNZ potentially cutting the OCR, limited housing supply, and high migration. 
House prices have stabilised after recent declines, with signs of modest growth in some areas. 
Rising construction costs and tighter lending rules may temper any potential boom. 
Alexander advises Kiwis to be cautious and consider their financial situation before entering the market.      
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Mortgage rate drops aim to prevent deeper market correction

Recent mortgage rate reductions are aimed at preventing a deeper housing market correction. 
ANZ suggests rates have fallen due to improved global financial conditions and reduced inflation fears. 
Further rate drops are unlikely without significant OCR cuts by RBNZ. 
The current economic environment remains challenging, with high inflation and tight credit conditions. 
ANZ advises that while rate drops provide some relief, the housing market remains under pressure.         
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Cutting loan payments may lead to higher long-term costs

Cutting home loan payments may increase long-term costs due to higher overall interest. 
Smaller payments could lengthen the loan term, potentially trapping borrowers in debt. 
Paying more now reduces the principal faster, saving on interest over time. 
Flexibility in payments should be weighed carefully against the impact on long-term financial goals. 
It’s crucial to assess your financial situation before making changes to mortgage payments.        
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Westpac reduces home loan rates in competitive market

Westpac has lowered its home loan rates amid a highly competitive lending market. 
The rate cuts apply to its fixed-term mortgages. 
Competition between banks is intense as they vie for borrowers in the cooling property market. 
This move by Westpac may prompt other banks to adjust their rates as well. 
Borrowers are encouraged to shop around for the best mortgage deals.      
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First-home buyers gain from declining prices and lower rates

First-home buyers benefit from declining house prices and lower mortgage rates. 
The current market conditions are creating more opportunities for first-home buyers. 
Lower interest rates have reduced mortgage costs, making it easier to enter the market. 
However, tighter credit conditions and higher DTI limits continue to pose challenges. 
ANZ notes that while prices are falling, affordability remains an issue for some buyers.      
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Housing downturn aids first-home buyers' affordability

First-home buyers are benefiting from a housing market downturn. 
Average purchase prices for first homes dropped by $21,000 from last year. 
Mortgages for first-home buyers have also decreased, with an average reduction of $47,000 in debt compared to 2022. 
35% of first-home buyer mortgages in July were low equity, meaning borrowers had less than a 20% deposit. 
Interest rates are declining, potentially increasing first-home buyer activity as the market stabilises.  
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Property investors shift strategies amid market changes

Property investors are shifting from a defensive stance to an active one. 
Rising interest rates and stricter regulations have previously challenged investors. 
Current market conditions, including falling prices and increased stock, are seen as opportunities. 
Investors are adapting by seeking properties with better yields and growth potential. 
The market is now favouring those with cash reserves or strong equity positions.    
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Auckland, Wellington, Queenstown-Lakes have highest rental costs

Auckland, Wellington, and Queenstown-Lakes are the most expensive regions to rent a home. 
Auckland tops the list with the highest average rent, driven by high demand and limited supply. 
Wellington follows, with rent prices reflecting strong demand in the capital. 
Queenstown-Lakes is also costly, with its popularity as a tourist destination influencing rental prices. 
Rent prices in these regions are significantly higher than in other parts of the country.    
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Auckland residential construction faces sharp decline amidst challenges

Auckland's residential construction sector is experiencing a significant decline. 
Rising costs, interest rates, and lower demand are contributing factors. 
The number of building consents issued has dropped sharply. 
Developers are holding back on new projects due to economic uncertainty. 
The slowdown may impact housing supply and affordability in the region.     
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July consents rise sharply, long-term decline continues

Building consents for new dwellings rose sharply in July, up 53.9% from June. 
The increase was driven by a large project in Queenstown-Lakes, which accounted for 385 standalone houses. 
Despite the July surge, the long-term trend shows a decline in building consents. 
Over the 12 months to July, consents were down 22% compared to the previous year. 
The total value of new homes consented also decreased by 23.6% over the same period.     
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Waiheke Island faces severe housing crisis, urgent solutions needed

Waiheke Island is experiencing the most severe housing crisis in the country. 
High demand, limited supply, and rising property values are contributing factors. 
Many locals are being priced out, leading to increased homelessness and housing insecurity. 
The island's infrastructure is struggling to keep up with the growth in population. 
Solutions are needed to address the affordable housing shortage and support residents.     
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$48M spent, Arlington site remains empty and delayed

Kainga Ora's Arlington development site in Wellington remains empty despite $48M spent. 
The site was initially intended for affordable housing but has faced delays. 
Challenges include community opposition and construction difficulties. 
The empty site highlights concerns over project management and resource allocation. 
There are growing calls for transparency and a timeline for completion.     
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