It’s easy to read the headlines and think that the property market is in a recovery phase.
Have you seen the headlines recently?
“Growing Confidence Fuels Market Momentum” – REINZ
These are the headlines, and many organisations know that they get more impact from the headlines as many people do not dig into the detail. What the REINZ actually are saying is that February showed some positive signs across the New Zealand property market, with increases in sales counts and auction activity. The article does have the sales data and it also shows that there are more houses for sale, they are taking longer to sell and house prices decreased too.
It’s pretty hard to equate that data to the headline.
Maybe People What To ‘Talk Up’ The Property Market
There are a lot of people with vested interest in seeing the property market turn the corner and for house prices to start increasing again and that includes the banking and real estate market, but there are also a lot of home owners that have seen the value of their homes drop and they are keen to see those values increase again.
Let’s look at the numbers.
- Median house prices DOWN 1.4% year-on-year
- Auckland prices DOWN 2.8%
- 10 regions with FALLING or UNCHANGED prices
- Properties taking LONGER to sell (41 days vs 38 last year)
- Unsold inventory (houses for sale) at near-decade HIGHS
None of these numbers point to a recovery.
Here’s what today’s numbers are actually showing us:
Supply is outpacing demand
When more houses are for sale than people wanting to buy them, prices drop. We’re seeing new listings at “decade highs” according to ANZ economists. More sellers than buyers means less pressure to pay top dollar.
Buyers are in no rush
When it takes longer to sell a house (41 days this year versus 38 last year) it means buyers aren’t feeling pressured to buy. Why would they be? With record numbers of houses available buyers know there could be another option or lower price just around the corner.
The market is correcting, not recovering
After years of unsustainable price growth, we’re seeing a natural correction. When houses cost 8-10 times annual income instead of the historical 3-4 times, something has to give and that has seen house prices drop.
Interest rates are dropping
For nearly eight years, we lived in a financial fantasy land of extremely low home loan interest rates. They were artificially low and created a property boom, but then the Reserve Bank changed tact and we saw the interest rates increase faster than ever before and that really slammed the brakes on. AS we discuss in our Kiwi Edition Market Updates the interest rates are now dropping which is helping Kiwis with mortgages, but everyone is still very wary of what has happened and so are not on a spending spree.
In Summary
You should always dig a little bit deeper than the headlines.
This is especially the case with the property market as so many people want the market to be doing well, and some belief that if enough people say positive things then that might help create demand (FOMO) and help kick-start the market again.
We do believe that the property market will start a recovery soon, but we are suggesting in Spring 2025. We believe that there is still quite a few houses to come to the market from property investors that want to refocus and have had to wait until April, plus some property developers still have plenty to sell which includes those just being finished now. These houses then they need to be sold through and that can take some months.
We also believe that the lower interest rates will take a while to have the desired effect – to see people spend more. Kiwis have had a hard few years and the first priority for many is to tidy up some debts and build up a bit of a backstop before they start spending.
There is also some real concern still with the economy and job stability. There have been some indicators that suggest the economy is slowly recovering, but it might take a bit longer until both businesses and households have the confidence to start spending again. Again, in New Zealand we tend to sit tight during winter and so Spring would be the more likely timing to see evidence of an economic recovery.
But if in doubt then keep in touch with the market reports here on Kiwi Edition.
We aim to provide all the news in easy bite sized articles and using the type of language that all Kiwis can follow.
