OPINION: Price Not Only Measure Of Housing Market’s Health

OPINION: As we enter a new year there is no shortage of forecasts as to what will happen to house prices.

The consensus is that prices will rise, but that is where agreement ends. Opinions on the extent of the increase, when it will start to occur and for how long it will last are as diverse as the number of economists and commentators whose role it is to make forecasts.

However, what the release (in late January) of the NZ Real Estate Institute’s data covering 2024 makes crystal clear is that prices over the past two years have remained stable with the yearly national median price sitting around $780,000.

While over the past two years there have been short-term price troughs and highs, taken across each 12-month span, the median price has barely moved.

I see that as a real positive in that it represents a market that has found its base and is starting to give confidence to vendors that they are not accepting ‘too little’ for their property and buyers that they are not paying ‘too much’.

It provides the platform from which the market can continue to benefit from some of the more positive trends occurring.

One of the less talked about aspects of market activity has been the recovery in the number of homes being sold.

The most recent peak in sales numbers was in 2021, when nationally some 81,000 homes sold. In 2022 (when prices were declining from their peak but still exceeding current levels) the number of homes sold fell to 67,000. In 2023 the number sold fell again to 63,000.

However, last year there was a strong recovery with 72,000 homes sold*.

Another positive aspect that has occurred over the past 24 months is the major increase in the number of homes listed for sale.

At the start of January, we had 5094 properties on our books, the highest number at the start of a year for 14 years.

Some commentators see the high number of properties for sale as a negative, with it indicating an inactive market – but as the overall number of sales in 2024 testifies, sales are anything but sluggish.

I see the current number of properties for sale as a positive for the market.

What the higher number of homes for sale represent is buyer choice in terms of location, lifestyle, price and size. It is an encouragement to buyers to view ‘what’s available’, adding to market activity.

While the flow of newly built homes to the market is likely to ease as 2025 progresses, the number of new consents being issued will ensure the steady growth in the size of the country’s housing stock.

The time may well be close that when evaluating the state of the housing market we can move away from simply comparing current prices with peak pricing.

There is no getting away from the fact that prices have fallen significantly over the past few years, and it may be some time before we see past peak prices eclipsed.  However, when you put today’s pricing into context of a market that will always be driven by demand, supply, mortgage interest rates and overall economic activity, then judging the health of the housing market by a singular factor is rather lop sided.

My position is the market has found its price base, sales activity is rising, the level of property reaching the market for sale (both in terms of new builds and from existing stock) is giving buyers the greatest choice they have had in more than a decade and interest rates are edging lower.

If the economy begins to grow, then the prospects for even greater activity are looking positive.

*Combination of NZREI, Stats NZ and CoreLogic data.

Peter Thompson, Managing Director

Barfoot & Thompson