Key Facts

  • The New Zealand real estate market had a slow start in 2023 with house prices falling and sales stalling as a result of rising interest rates and cost-of-living pressures.
  • The Reserve Bank of New Zealand raised the Official Cash Rate to 5.5% in May 2023, signalling the end of cash rate increases.
  • June 2023 saw regulations loosened on the CCCFA (Credit Contracts and Consumer Finance Act) and LVR (loan-to-value ratio), resulting in increased activity from first-home buyers.
  • Bank economists predict housing costs are set to rise again with increases of up to 7.5% forecasted in 2024.
  • The OneRoof-Valocity House Value Index showed an average drop of 14% per house in New Zealand, equivalent to $154,000, during the slump. This figure was even higher in Auckland and Wellington Region, where property values decreased by 18% and 25% respectively.
  • Expected factors driving a market resurgence include a relaxation on restrictions, likely decrease in interest rates, and demand from first-home buyers.
  • Proposed changes to the debt-to-income ratios resulted in further uncertainty for potential buyers and sellers.

Article Summary

After entering 2023 with a pessimistic outlook, the New Zealand real estate industry is observing a shift in the housing market. Despite an initial slump that saw shrinking house prices and sales, regulatory changes and a forecasted pause on cash rate increases sparked a resurgence in activity, particularly from first-home buyers.

A significant turnaround was noticed after the Reserve Bank of New Zealand raised the Official Cash Rate to 5.5% in late May, indicating an end to cyclic increases. This, paired with looser restrictions on CCCFA and LVR, boosted the confidence of homebuyers. As a result, peak slump conditions experienced in the first half of 2023 have been gradually improving.

The market plunge resulted in an average 14% drop in house prices nationwide – a figure that translated to a striking $154,000. Certain regions, such as Auckland and Wellington, felt a sharper sting with an 18% and 25% drop respectively. Despite this trying period, a fresh surge illuminated by easing restrictions and potential interest rate cuts point towards a hopeful future for the property market.

However, uncertainty remains, particularly concerning possible alterations in debt-to-income ratios imposed by the Reserve Bank. This change would limit the borrowing capacity of potential homebuyers, creating a ceiling for future house price growth – an aspect potential buyers and investors will need to consider.

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