House prices cool
Auckland house prices drop 1.6% over March-April period; down 21.4% from peak.
The onset of winter has had a cooling effect on house prices.
The REINZ House Price Index (HPI) recorded declines in 10 of the country’s 12 regions over the March-April period, ranging from -0.2% in Northland to -1.6% in Auckland.
Pundits are calling it a trend, with most regions posting drops in their HPI over the last three months to April.
House Price Index – April 2024
REINZ’s national median selling price was $790,000 in April, down 1.2% compared to March. Auckland recorded a slightly bigger drop, with the median price of $1,050,000 in April down 1.9% compared to March.
Rebound on the cards?
House prices have eased, but the situation could quickly reverse as the market absorbs the impact of changes to the bright-line test, the reintroduction of tax deductibility, and continued population growth.
According to property research firm Valocity, the reduction of the bright-line test to two years could mean that around 58,000 properties avoid income tax, saving on average between $55,000 and $65,000 each in tax.
The test was introduced by National in October 2015 to curb property speculation, and initially applied to properties sold within two years. The Labour Government extended the bright-line period to five years, and then to 10 years in March 2021 to take the heat out of the housing market and level the playing field for first-home buyers. Under National, the bright-line period will revert to two years.
National is also reinstating interest deductibility on residential rental properties – a boost for investors who will once again be able to reduce tax year-on-year. The change allows investors to claim back 100% of interest expenses for rentals from April 1, 2025.
A more favourable tax regime will encourage investors back into the market.
Also consider that last year New Zealand recorded its largest-ever population increase: 145,100 new Kiwis arrived in the year to December 2023. These people have got to live somewhere. And while the pace of growth has slowed this year, the estimated population increased by 24,600 in the first quarter, according to Statistics New Zealand.
Remember, too, that New Zealand’s building deficit persists. Building consents are still falling – in March 2024, the seasonally adjusted number of new dwellings consented fell 0.2%.
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