Property Market: Green Shoots Take Off in February

Momentum returned to the residential property market in February with prices, sales, and listings all up.

The latest data from the Real Estate Institute of New Zealand (REINZ) offered a picture of a market shift in what has been a challenging economic environment. While interest rates, inflation, employment levels, and immigration are still taking a toll on our economic recovery, more people are ready to buy and sell in this property market.

“Although buyers are still a little hesitant, we are seeing sale prices moving although at a more cautious rate,” Harveys Head of Network Campbell Dunoon said.

“Buyers in Auckland are attending open homes but are being more considered in their purchase decision. There are more properties coming on the market than we have seen in some considerable time. Nevertheless, there is more competition returning to the property marketing which is why we saw property prices slightly increase in February.”

Market Growth

The figures from REINZ showed a significant increase in market activity, with listings up more than 60 percent and the number of sales up 81 percent compared to January with 5,693 listings sold in February.

Property prices have also increased, with the national median house price sitting at $790,000, up 3.1 percent year-on-year and 3.9 percent since January.

“This is the first year-on-year median house price increase we have seen since prices started to dip in September 2022. Nine of the 16 regions saw an increase in their median sales price, with Auckland ticking back above one million dollars with a 2.6 percent increase. But we also saw strong results in Northland, Gisborne, Taranaki, Nelson, Canterbury and Southland,” Dunoon said.

“These results show that while there is a lot of attention on Auckland’s property market and its slow recovery, the regions have remained strong. This shows how the economic recovery and growth is different across the country.”

Investors are anticipated to be returning to the market as the National, Act and NZ First government start to change the interest rate deductibility rule for investment property owners.

The previous Labour government started to remove the ability for property investors to offset interest expenses against rental income. From 1 April those rules will start being removed, with investors being able to claim 80 percent of their interest expenses this year, and 100 percent from 1 April 2025.

Additionally, the government has proposed changes to the bright-line property rules from 1 July 2024. Currently, those who sell a property may have to pay tax on any profit from the sale. If changes get passed, this will be reduced to two years.

“The process to remove interest rate deductibility on rental properties, and lengthening out the bright-line test to five years discouraged investors from entering the market while increasing their costs. Bringing back interest rate deductibility and reducing the bright-line test should mean we will see increased activity at an investor level as July gets closer,” Dunoon said.

Economic Impact

Due to the Reserve Bank of New Zealand (RBNZ) holding the cash rate at 5.50 percent since May 2023, the ability for economic growth has been stunted, Harveys Head of Research Mathew Tiller said.

“The prevailing economic conditions highlight a scenario where elevated interest rates are beginning to dampen demand and moderate overall economic growth. Despite these challenges, the journey towards achieving sustainable inflation targets continues, potentially requiring further interventions by the RBNZ,” Tiller said.

Despite the staunch move from the RBNZ to keep the cash rate high, banks have been easing mortgage interest rates slightly.

February 2024 Real Estate Market Highlights

• New Zealand has recorded its first year-on-year median price increase since September 2022.
• Over half (9 of 16) regions had year-on-year median price increases with Gisborne leading the way with a 7.7 percent increase.
• In Auckland, six of seven Territorial Authorities (TAs) had positive year-on-year median price movements with North Shore City the strongest at +5.3 percent, followed by Papakura City at +4.1 percent.
• Auckland’s median sales price increased above the $1 million mark, up to $1,025,000.
• The total number of properties sold increased in February (+81.8 percent) compared to January 2024 for New Zealand from 3,132 to 5,693 and from 4,129 to 5,693 (+37.9 percent).
• New Zealand had its highest median Days to Sell since February 2023.
• Median Days to Sell increased by 1 day month on month up to 51 days and reduced 9 days year on year down from 60.
• Eleven of 15 regions have had an increase in inventory in February 2024 compared to one year prior.
• Listings increased by 60.4 percent from 8,143 to 11,788 nationally month-on-month and by 44.8 percent from 7,347 to 11,788 year on year.
• All 15 regions had a year-on-year increase in listings with Gisborne being the only non-double-digit increase (+9.7 percent).
• Nationally, 19.4 percent (1103) of properties were sold at auction in February 2024, compared to 6.0 percent (188) in January 2024.