There will undoubtedly be more surprises ahead in 2024 but - in New Zealand, at least - the year has started off with a much greater sense of stability and clarity and that’s creating more confidence in the property market.
Following National’s win at the election last year and the coalition agreement, business confidence was at the highest level in nine years. That tends to be the case when a National government comes into power and while the market hasn’t quite accelerated out of the gates as we expected and isn’t back to the peak of 2021 as far as prices go, there is certainly more positivity as inflation cools, interest rates drop and new more property-friendly policies are implemented.
Now we’ve set the context let’s look at the likely trends in store for the property market in 2024:
While ANZ downgraded its estimated property price increase in 2024 to 4%, it said that faster than expected decreases to interest rates could fuel demand. Some of the major banks have already dropped their home loan rates, and those rates are expected to continue falling this year, which will increase buyer confidence, particularly at the lower end of the market.
At New Zealand Sotheby’s International Realty (NZSIR), the increased positivity and certainty can be measured in the more than 700 listings on our website, the most we’ve ever had. It’s a bit of a horse and cart scenario, because when the number of listings increases, it tends to create more confidence among other sellers to list as they have more options available to buy.
With more confidence in the broader economy and among individual businesses, it means that people are more comfortable to push on with larger property purchases.
We’ve seen recent sales in Remuera and North Shore at the $11-12 million mark and some significant sales in the Southern Lakes region of $12-14 million - these are both domestic buyers and Americans with New Zealand residency.
Interest in the Te Taumata / Lakeview development in Queenstown has started off very well given the premium price point and there’s growing interest in the high-end apartment market in Auckland. We expect that to continue in 2024 as the downtown area continues to improve - due to the introduction of new crime and justice policies, the completion of infrastructure and beautification projects, and the arrival of more high-end retailers.
Elsewhere, Christchurch continues to grow in popularity as new public buildings are opened and the central city becomes increasingly vibrant. NZSIR opened an office there at the end of 2023 and it has already had good success with listings. Another Christchurch office will be opened this year, which shows the faith we have in this market, and we expect prices to reflect that growing appeal.
Policy changes around interest deductibility and the Brightline test being reduced to two years are set to come into effect this year and this has certainly encouraged investors back into the market. It’s also got first home buyers on the hunt because they feel like they may be beaten to the punch as competition increases. As a result, we’re seeing a lot of transactions at the $1.5 to $3 million mark in Southern Lakes, Auckland and Hawke’s Bay.
One of the biggest disappointments of the coalition agreement was the nixing of National’s plan to allow overseas property buyers into the market as long as the properties were worth over $2 million and they paid a 15% tax on the purchase.
Despite Winston Peters’ involvement in the foreign buyer ban policy under Labour, we’re confident this policy will be implemented in some form in this term of Government, perhaps with a higher price barrier and some tinkering around the edges.
The changes to the investor visa rules under the previous Labour government were unnecessarily complicated, and the waiting list went from many hundreds to single figures. It’s clear from the number of enquiries we’re still getting that there is plenty of demand from overseas buyers and many of them are hopeful the policy will be changed to allow them into the New Zealand market.
At NZSIR, we generally have a steady enquiry level month-on-month from the US, but in October we saw this increase by 200% from the normal level.
While the rates of enquiry dipped after the coalition agreement was announced, they remain high and we’re currently working with groups of Americans who are standing by and waiting on their own election results this year.
There was plenty of talk about Americans moving out of the country after Donald Trump was elected president, but there wasn’t much follow-through. This time, however, given they’ve already had a taste of what that life could be like if he wins a second term, it could be different. If the foreign buyer ban is relaxed, as we expect it eventually will be, it will be interesting to see who else is out there and what positive things it might lead to for the country.
Even if the price barrier jumps to $3 or $4 million and the tax is increased from the proposed 15%, I believe there will still be plenty of demand from overseas buyers. Most of the international clients we deal with were not put off by the proposed tax because there are similar rules elsewhere (in Singapore, for example, the foreign ‘stamp duty’ increased from 30% to a whopping 60% last year).
We’ve also noticed an increase in the number of Australian enquiries in recent months, with many of them looking to buy now in case the rules change and more overseas buyers come into the market.
We don’t believe allowing foreign buyers into the top end of the market will have a big impact on overall property prices, but where foreigners do affect prices - and particularly rents - is through migration. New Zealand had record net migration last year and the prime minister has said that it is not sustainable given our lack of housing supply (Australia had a similar net migration boom last year and is looking to reduce those numbers and reduce that pressure).
On the positive side of migration, however, we’ve seen a few examples of apartments being bought for international students who are returning to Auckland. This requires New Zealand residency or for the buyers to be from Australia or Singapore, but it’s good to see the education economy recovering.
Some regional economies are more susceptible to macro shifts, geopolitical issues or price variations in exports. International tourism has returned at a rate of knots, which is helping to boost house prices in areas like the Southern Lakes, Coromandel and Hawke’s Bay (other factors like Airbnb are also making it difficult to find rentals in some of these areas).
But many other rural sectors are doing it pretty tough at the moment and the value of lifestyle properties in places like Tauranga have dropped back as last year’s weather events affected the quality of crops. They are still fantastic places to live, however, and the growing conditions have been much better since then, so we’re confident things will improve in 2024.
Construction bottlenecks have reduced significantly and while it’s still expensive to build, the huge cost increases we’ve seen for materials over the past few years are slowing.
There is now more capacity in the sector and, as a result, section prices in some regions are starting to rise again after a long plateau.
Overall, from our perspective, the election of a new Government has been a positive stimulant for the economy and there is general agreement we’re in for a soft landing. Improved confidence in the business sector is closely linked to confidence in the property market, so we’re expecting a positive 2024, more big sales and a slow and steady increase in property prices in most regions around the country.
Things are certainly rosier, but not quite bubbly.
Markus Blum, Auckland South-East Principal, explores how migration affects the demand for housing.
Stories that get you closer to the most beautiful homes and lifestyles in the world and in-depth market research to help with your next move.