Key Facts

  • New Zealand house prices are predicted to rise in 2024, with estimates ranging from 5% to 10% increase.
  • Factors contributing to this trend include population growth due to migration, a slowdown in the construction of new homes, and changes to home loan interest rates.
  • The country has seen a population surge, with 100,000 more people entering than leaving over the last year. This is the highest population growth in decades.
  • The number of building approvals for new houses has been declining, leading to a supply-demand mismatch which is expected to push prices higher.
  • Rising interest rates have put pressure on homeowners, discouraging new buyers, but economists predict these rates to stabilize.
  • Trends in inflation and unemployment also affect the housing market. Lower inflation rates could lead to lower interest rates, thereby boosting house prices.
  • A reduction to the bright-line test (for capital gains tax) could encourage more sellers into the market. However, even then, the number of listings is expected to be below the typical annual average.

Article Summary

Most market commentators are predicting a rise in 2024 for New Zealand house prices. Independent economist Tony Alexander is one of the most positive, hinting at a potential 10% increase. Comparatively, other entities like Westpac and Kiwibank are forecasting about 7-8% increases, and CoreLogic expects a more patchy growth around 5%.

The upsurge in housing prices is primarily driven by increased population growth due to record-level migration and a simultaneous decline in the construction of new homes. CoreLogic’s Kelvin Davidson points out the relevance of employment rates in this picture, as homeowners need to maintain their jobs to afford their loans. While unemployment figures showed a marginal increase recently, the levels remain relatively low.

Home loan interest rates played a pivotal role in the housing market’s volatile journey over the past few years. After driving the market boom with record lows in 2020, subsequent raises caused by the Reserve Bank’s measures against inflation resulted in a fall in housing prices over 18 months. Opinion among experts is split on how this situation will develop.

On one hand, Kiwibank’s Jarrod Kerr predicts that inflation might fall below the Reserve Bank’s 3% target, potentially leading to decreased interest rates and an increase in house prices. On the other hand, Westpac’s Kelly Eckhold envisages a sustained level of high inflation, indicating that lower interest rates might not occur soon.

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