Spring is just around the corner, and we’re looking forward with optimism to warmer weather and a lift in Auckland’s real estate market.
Although the market widely anticipated interest rate cuts by November at the latest, the earlier decision by the Reserve Bank of New Zealand (RBNZ) to drop the Official Cash Rate, marks the start of what is expected to be a gradual easing of interest rates over the coming months. It’s generally accepted that the RBNZ acted in response to the recent weak economic data across various sectors of the New Zealand economy, particularly in the past couple of months.
The RBNZ also acknowledged that inflation has tracked well below its forecasts over the last three quarters. While the official numbers don’t yet reflect it, annual inflation is expected to be comfortably back within the target range of 1%-3% by October. According to the RBNZ’s updated forecasts, we can expect two further OCR reductions by Christmas (totalling 0.5%) and an additional 1% reduction in rates to be delivered incrementally throughout 2025.
On the 20th of August, the Real Estate Institute of New Zealand reported on July 2024’s figures that while listings continue to rise, the increase in sales volumes has caused the total number of properties for sale in New Zealand to fall compared to the previous month. Median prices have also decreased by 2.2% nationally compared to a year ago. There has been downward pressure on prices in most parts of the country this year, with lower-than-average sales volumes as the cost of living, concerns around job security, and interest rates challenge many New Zealanders.
On the 27th of August, Trade Me’s property rental price index showed that New Zealand rents fell in July for the second consecutive month. As Gavin Lloyd, Trade Me Property’s Customer Director, noted, “Only time will tell whether prices will follow the usual seasonal pattern and pick up come summer or whether rising unemployment and a stagnant economy will suppress rents heading into the high season.” Rental listings on Trade Me skyrocketed in July, reaching their highest number since 2019, representing an 11% increase compared to June and a 46% increase year-on-year. Regions such as Gisborne, the West Coast, Hawke’s Bay, Auckland, and Bay of Plenty have been driving the high supply of rental properties.
Property investors must be realistic with rental price expectations in a declining market. The highs of 2021, which largely continued until February this year, have passed. Data from realestate.co.nz showed a 40% increase in rental listings in the three months to May 2024, while the number of rental seekers increased by just 2.5%. Trade Me data showed that Auckland had 1,450 additional homes for rent between 28 February and 28 May—a 41% increase in stock.
Economist Ryan Greenaway-McGrevy, who researches zoning reforms, noted that “upzoning in some major cities has enabled a construction boom.” He suggested that new buildings coming to fruition may be driving the increase in rental stock. We can confirm that this is a reality in Auckland suburbs where high-density developments are settling. Owners of older properties should be aware of this shift. Preserving a property’s appeal and value when faced with increased competition is essential. This is why we proactively report to our clients when repairs and maintenance are due and work towards long-term maintenance plans to keep our managed properties ahead of the competition.
As we move into spring, it’s the perfect time to reassess your property strategy. Whether you’re looking to buy, sell, or rent, our team is here to guide you through these market changes. Reach out to us today to discuss your property needs. Let’s make the most of the opportunities that the coming months will bring.
