The Real Estate Institute of New Zealand’s (REINZ) House Price Index (HPI) reported a 16.7% decline nationally from the market peak reached in 2021. This has taken real inflation-adjusted house prices back to their pre-pandemic level at the start of 2020.
But in August the Reserve Bank of New Zealand cut the official cash rate by 0.25% and has signalled that significant further cuts would be made over the next 18 month. Business confidence took a leg up, bouncing to a net 51% positive from just 6% in response, banking on the end of the recession which has gripped the country.
Net Migration is also falling away rapidly, according to statistics New Zealand, and we are seeing more property coming on market with inventories up by 30% compared with last year, while sales volumes are down compared with last year and more property being subsequently withdrawn from market failing to find a buyer at their desired asking price.
So net net, it seems likely that as we go into spring and summer in New Zealand, demand might be higher thanks to lower rates but offset by lower migration, while supply is higher but transaction volumes are lower. Which begs the question, are we seeing the property market turning?
Well, the latest report, or should that be marketing document from the REINZ for August shows “signs of increased confidence, optimism and activity compared to the previous year. While the overall sales volume slightly declined, several regions reported notable increases in activity, and year-on-year listing numbers continue to rise”.
All up, its probably too soon to talk about an uptick in property values, but there may well be more property coming on to the market, and an uptick in sales to boot. Further rate cuts will help, and of course the loser regulations on investment property may also assist, but migration driven demand is falling.
Its probably way too early to declare victory, for now. REINZ Chief Executive Jen Baird said August provided a sense of confidence and positivity to the property market. I would remain more cautious. Auckland still seems to be more exposed while some South Island markets though smaller are more positive. And there is considerable uncertainty ahead.
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