Is the real estate market on the up? Westpac Bank thinks so. The bank has revised its forecast for house prices and now expects them to rise by about 8% next year and another 5% in 2026.

Chief economist Kelly Eckhold said the bank didn’t expect too much for the balance of 2024 but sees things picking up through 2025 when interest rates will be in the mid-to-high threes.

“We don’t see a boom – our forecast sees house prices growth a touch above long-term average in 2025. The still weakening labour market will act as a brake for a while yet. But we see these lower interest rates as providing a fillip to the market relative to the stagnant performance seen thus far in 2024.”

Other banks are thinking the same.

  • ANZ: 4.5% growth next year and 5% in 2026
  • Kiwibank: Increases between 5-7% next year, and similar the year following.

Who’s buying?

Economist Tony Alexander’s monthly survey of real estate agents tracks buyer profiles.

For the past couple of years, first home buyers were the movers and shakers in the housing market.

  • End of 2022: 16% of agents said they were seeing fewer first-home buyers looking to buy.
  • February 2023: what a turnaround – 22% of agents said they were seeing more young people. By August the figure jumped to 66%

But then the worm turned in late 2023 into 2024, thanks to a flood of properties hitting the market, worries about interest rates, rising unemployment, and cost-of-living.

  • June 2024: 3% of agents were seeing fewer first-home buyers.

Now, with interest rates falling and further reductions on the radar, younger house buyers are back in the game.

  • 56% of agents seeing more young buyers

Survey results also show the reemergence of investors.

  • End of 2022: 69% of agents said they were seeing fewer investors. The figure dropped to 41% in February 2023 and flattened to zero in August – despite the surge in first-home buying
  • June 2024: 24% of agents said there were fewer investors. However, a November survey showed a strong net 43% agreeing that more investors were in the market

Hotter competition will stoke future price rises

The combined activity of both buying groups is likely to be a factor in future price rises.

  • 8% of agents say that they feel prices are now rising in their area – a first positive assessment since January and a vast distance from 55% who said prices were falling in May
  • In Auckland a net 15% of agents said prices are rising

But don’t expect anything like a frenzy.

  • Only 19% of agents said they saw buyers displaying FOMO (fear of missing out) – up from 1% in June, but well down on the 40% late last year
  • Listings are going through the roof. Data from OneRoof shows the number of residential properties for sale is up 24% year-on-year, with nearly 12,000 new listings hitting the market in the last 30 days
  • 58% of agents said they are receiving more requests for property appraisals
  • 32% of agents said it is vendors who were most keen to get a transaction over the line, not buyers

Alexander expects a seller’s market to return “probably around the middle of next year.”

“Lower interest rates will help as will the still quite high level of house construction and evidence from data on issuance of dwelling consents that standalone house construction may already be rising again,” he said.

House prices hit a trough in May 2023 after a 17.8% drop, but then rose in the second half of last year before tailing off at the start of 2024. Since then, prices in several regions have declined. Let’s call it a ‘sideways’ phase of the property cycle, which typically lasts two to two-and-a-half years before prices start climbing again.

We’re about 18 months into this phase, so it’s reasonable to expect another six months of choppiness before prices rise.

Listings are on the rise and buyers are busier. Call 0800 GOODWINS for an appraisal or a chat to get a sense of the market in your part of Auckland.