Market steadies, outlook brightens
Kiwibank predicts a positive shift for NZ’s housing market in 2025, with stabilizing prices and recent interest rate cuts expected to boost buyer confidence and spur modest growth.
House prices hold steady, future optimism grows
The New Zealand housing market is showing signs of stability, with house prices remaining largely flat over the past 18 months, according to Kiwibank.
According to REINZ’s October 2024 data, house prices edged up by 0.5% month-on-month, marking a third consecutive monthly rise.
Although still down 1.1% year-on-year, there is optimism for the future as interest rate cuts are expected to fuel confidence and activity in 2025.
“There seems to be light at the end of the tunnel,” said Jarrod Kerr (pictured above), chief economist at Kiwibank, adding that lower interest rates should soon drive increased market engagement.
Regional trends reveal a mixed picture
Across the country, the property market’s performance varied. Auckland recorded a minor monthly increase of 0.2% but saw a 3% annual decline. Excluding Auckland, national property prices were up by 0.66% month-on-month.
Wellington also showed small gains, with a 0.3% monthly increase, though prices remain 2% lower than last year. The South Island outperformed the North, with notable yearly gains in Canterbury (+2.4%) and Otago (+3%). Southland led the country with a 3.5% increase over the year.
Listings and selling times show positive signs
October saw an increase in property listings as sellers tested the market, driven by seasonal factors and improving buyer confidence.
The time it takes to sell a property, a critical market indicator, dropped from 49 days in September to 42 days in October, signaling a narrowing gap between buyer and seller expectations. Though still above the long-term average of 39 days, this reduction hints at a more balanced market.
Interest rate cuts expected to drive demand
The Reserve Bank (RBNZ) recently cut the OCR by 50 basis points and may continue easing, with another cut expected in November.
Analysts, including Kerr, suggest that a rate around 3% would remove current restrictions and stimulate demand.
“A return to a more neutral setting around 3% is in focus,” Kerr said, adding that this rate would better support the market and help ease financing costs.
Investors on the sidelines, but changes ahead
Interest rate cuts are expected to lure investors back into the market, especially as rental yields rise. Rents are increasing at the fastest rate in over 30 years, creating attractive opportunities for investors.
Additional government measures, such as reintroducing interest deductibility and adjusting the Brightline test, may also encourage more investors to return.
Kiwibank’s positive outlook for 2025
Looking ahead, Kiwibank forecasts a 5-7% rise in house prices for 2025, driven by lower interest rates, increased migration, and a shortage of housing.
Kerr highlighted the role of government infrastructure investment in supporting demand.
“Interest rates will play a larger role from now,” the Kiwibank economist said, with increased investor activity and rental demand further tightening the market.
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