New Zealand house prices are expected to make a significant turnaround in the upcoming year, with a forecasted increase of 6% as a result of interest rate cuts by the Reserve Bank of New Zealand. Despite a recent decline, home prices in New Zealand are closer to their peak in November 2021, standing just 19% below that mark. The aggressive interest rate hikes have managed to stabilize the overheated housing market, with average house prices dropping from NZ$800,000 in March to NZ$753,000 in July this year.
A survey of 11 property market analysts conducted from August 20-30 predicts an average price rise of 1.0% for this calendar year, down from the 4.5% forecasted in a previous poll in May. Experts anticipate that house prices will remain weak in the short term, but there is optimism for a rebound towards the end of this year and into 2025. The estimate is for a 6.0% increase in average house prices next year and a 5.0% rise in 2026.
Factors Influencing the Housing Market
Despite challenges such as rising unemployment and a weakening economy, lower interest rates are expected to have a positive impact on the housing market. The Reserve Bank of New Zealand has already cut interest rates by 25 basis points and is projected to make further cuts of 50 basis points this year and 125 basis points in 2025. This move is likely to increase purchasing affordability for first-time home buyers, with six out of eight analysts foreseeing an improvement in affordability, thanks to declining interest rates that will lower debt servicing costs.
According to Henry Russell, an economist at ANZ, although the near-term outlook suggests weakness in house prices, there is anticipation of an uptick in activity in the later part of this year and into 2025. He highlights the uncertainty regarding the impact of lower interest rates and the potential for a quicker return of confidence in the market than initially expected. Nick Tuffley, the chief economist at ASB Bank, also weighs in on the improved affordability for first-time buyers due to the significant reductions in interest rates.
While the New Zealand housing market has experienced fluctuations in recent months, there is cautious optimism for a revival in the coming years, driven by interest rate cuts and improved affordability. The future of house prices in New Zealand seems to be on a positive trajectory, with the potential for growth and stability in the market.