Find a branch
Contact
Help
OPINION: With the fall in the OCR to 4.75% in October, the last barrier holding back the residential housing market from making a positive recovery has been breached.
Immediately, the trading banks reduced their mortgage interest rates, and by mid-October the rates on offer for 1 year were under 6%, and for floating under 8%. Compared to where rates were a few months earlier, they are now extremely attractive.
The reduction came at the same time the Reserve Bank announced that the rate of inflation had declined to within its targeted range of 1% to 3%, and that the outlook for the economy was improving.
The positive news in relation to these two important economic drivers could not have come at a better time for the housing market.
We are now entering the strong spring selling season, and activity will be at its highest from now through to March/April 2025.
The market was already starting to stir in September in the form of rising house sales numbers, and with the additional impetus of lower interest rates and low inflation, sales are now likely to match the optimism market participants have been expressing.
Given the number of properties currently on the market nationwide, it is likely that a buyers’ market will be with us for some time, which should mean that sales will rise faster than prices.
Although building consents nationally are down a quarter on where they were last year, at more than 33,000 for the year ending June 2024 (Stats NZ) new builds will continue to reach the market in strong numbers, ensuring that even if sales numbers rise buyers are unlikely to be restricted for choice.
In Auckland, the majority of consents remain for apartments and town houses. This trend is likely to continue well into the future with Auckland Council’s Monthly Housing Update (for September) showing that over the past 12 months around two thirds of all building consents are for this form of housing.
Combined with the move to apartment/town house living is a major increase in the clustering of new property being built around the City’s Rapid Transport Network. The Council reports that in the past 12 months a quarter of all dwellings consented were located within 1.5k (defined as with walking distance by the Council) of the RTN.
The Government’s decision to require Council’s to free up 30-years’ worth of land for urban development and housing has received the endorsement of Canada’s Center for Demographics and Policy, based at Chapman University. The university annually rates housing affordability on a median house price/median income basis in metropolitan areas across eight nations. Its latest report states: New Zealand’s newly formed government has adopted a “Going for Housing Growth” based upon the understanding of the housing affordability as a land cost
problem. They cite research showing that urban growth boundaries alone add a staggering NZ$600,000 (US$370,000) to the cost of land for houses on Auckland’s edges. “Going for Housing Growth” will seek to ensure abundant developable land within and around cities, preventing the artificial scarcity that drives up prices. This is in contrast to housing affordability policies that are limited to densification strategies.
In the report, Auckland (the only New Zealand city to be ranked) has a score of 8.2, making it the 12th least affordable city covered.
The least affordable was Hong Kong with a score of 16.7. Of the other 10 cities ahead of Auckland 5 were US cities, 3 Australian (Sydney 13.8, Melbourne 9.8 and Adelaide 9.7) and 2 Canadian. In the ratings league Auckland was placed between Brisbane (more affordable, on 8.1) and Toronto (more unaffordable, on 9.3).
Although Auckland retained its ‘seriously unaffordable’ rating, the two positives that can be taken from the report is Auckland’s rating had improved from 8.6 to 8.2 between 2019 and 2024, and the claim that Australia’s major cities offer more affordable housing than our major international city has been undermined.
Peter Thompson, Managing Director, Barfoot & Thompson