NZ residential rental market news, July 5

Policy changes take aim at affordability, the Bright Line rule change, and rapid interest rate cuts?

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

Policy changes unlikely to shift subdued housing market

House prices fell 0.5% in June, continuing recent declines. 
Annual house prices rose 1.8%, but recent gains have stalled. 
Auckland saw a 1.2% drop in June, the largest since August 2023. 
High mortgage interest rates are restricting housing credit demand. 
Regulatory changes on 1st July are unlikely to significantly impact the market. 
RBNZ’s focus remains on inflation control, with no major OCR changes expected. 
Borrowers are refinancing to get better deals amid low transaction levels.    
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Key insights into the current property market

The economy is currently struggling. 
Buyers are keen but face challenges in closing deals due to high mortgage rates. 
DTIs are seen as worth trying to restore market normality. 
Provincial buyers are less concerned about DTI caps. 
Banks may reserve high DTI allowances for expensive markets. 
Early actions by property owners may be preventing mortgage stress. 
Loan term extensions are preferred over interest-only loans. 
The shorter Brightline test might increase selling activity. 
Some investors may face unexpected tax bills. 
Investors are questioning the level of interest rates to return to the market.     
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Asking prices drop amid high housing stock levels

Average asking price of homes listed on Realestate.co.nz fell by $90,071 since February. 
Auckland's average asking price dropped over $100,000 in the same period. 
National housing stock reached a 10-year high with 31,745 residential properties for sale. 
Wellington saw the largest increase in stock, up 49.8% from last year. 
New listings rose 25.5% in June compared to last year. 
Price declines reflect more realistic vendor expectations and benefit buyers.   
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Auckland sellers lower prices to finalise deals

Auckland house sellers are accepting lower prices to close deals. 
High mortgage rates are making it difficult for buyers. 
Median house prices in Auckland have decreased significantly. 
Sellers are motivated by a need to offload properties amidst market challenges. 
The current market downturn has led to more realistic pricing.   
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New housing rules aim to improve affordability

Government plans to liberalise housing rules to make property more affordable. 
Urban limits will be expanded, making more land available for development. 
City councils can opt out of Medium Density Residential Standards if they zone for 30 years of growth. 
New rules aim to lower development costs by removing minimum floor area and balcony requirements. 
Discussions with banks regarding relaxing lending criteria for smaller apartments. 
Housing market affordability is a key focus, targeting medium to long-term improvements.   
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Bright-line rule change to boost property listings

Bright-line rule changes on July 1 will increase property listings. 
Sellers of investment properties bought between 2019 and 2022 can now sell tax-free. 
Rising interest rates and insurance premiums motivate investors to sell. 
Real estate agents report increased enquiries from stressed investors. 
Experts doubt a flood of cheap properties will hit the market. 
Some investors are restructuring their portfolios by selling smaller properties. 
Auction listings range from $400,000 to $3 million. 
Christchurch market sees strong buyer interest due to affordability. 
South Auckland and Kāpiti Coast see rising activity from both sellers and buyers. 
Kāpiti Coast is becoming more attractive due to its proximity to Wellington. 
Investors struggle to cover costs, prompting sales. 
Not all experts agree on the impact of the rule change on market listings. 
Some predict increased listings will keep house price growth low for 2024. 
Limited properties benefiting from the rule change could lead to price rises post-summer.      
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Government liberalises planning rules to ease housing crisis

Government plans to liberalise planning rules to address the housing crisis. 
Urban-rural limits will be scrapped, and mixed-use zoning will be encouraged. 
Minimum floor sizes and balcony requirements for apartments will be abolished. 
Councils will need to zone for 30 years’ housing growth. 
The changes aim to make development easier and more affordable. 
The government expects these changes to lower land and housing costs over time.    
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Rising odds of pre-Christmas interest rate cut

Chances of an interest rate cut by RBNZ before Christmas are increasing. 
This is good news for borrowers but indicates a weak economic outlook. 
NZIER's survey shows fewer businesses plan to raise prices, indicating lower inflation. 
ANZ Business Outlook also shows a drop in businesses planning to raise prices. 
Current economic conditions do not yet justify an immediate rate cut by RBNZ. 
Housing market remains weak with fewer first-home buyers and investors. 
Job worries are a major concern for buyers, reducing demand. 
Buyer fear of missing out (FOMO) is at a record low. 
Sellers need to be realistic about bargaining to avoid properties becoming stale. 
No significant increase in the average days to sell a property. 
Many properties are being rented out, slowing rent growth. 
New-build consents have fallen by 23% in the past year.    
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Kiwibank forecasts rapid interest rate cuts next year

Kiwibank predicts the OCR will be cut to 4.5% by June 2024 and 3% by June 2025. 
Interest rate cuts are expected to begin in November. 
Inflation is forecasted to be within the RBNZ’s target band of 1%-3% by the third quarter of 2024. 
Economic growth is projected to be 0.1% this year, with a peak unemployment rate of 5.2% by mid-2025. 
High interest rates are currently restraining economic and housing market recovery.   
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ASB forecasts OCR cuts starting in November

High interest rates and inflation pressure households. 
Inflation indicators are softening, suggesting a return to the RBNZ's target band by year-end. 
Labour market changes include slower wage growth and increased job security concerns. 
RBNZ risks over-tightening, harming the economy and employment. 
November's OCR cut will follow Q3 CPI and labour market data.  
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