What's happening with NZ house prices? (2024) | Property market (2024)

How fast are property prices recovering in the New Zealand property market?

Property prices across the country are currently recovering ... in most places.

Up until recently New Zealand house prices had been falling.

House prices peaked in Nov 2021. They then fell 17.80% and appeared to bottom out in May 2023.

Since bottoming out NZ house prices have increased 1.37%. That includes REINZ house price index data through to Jul 2024.

Let's say you owned a $1 million property in Hamilton (at the peak of the market).

If it followed the NZ market perfectly, it would now be worth $833k.

That's a loss of $167k, at least on paper.

However, house prices fall at different rates around the country.

This graph shows how far prices have fallen since their peaks in different areas of the country.

House prices in South Wairarapa District have fallen fastest. Prices there are down 30.70% since house prices peaked in Dec 2021.

Ruapehu District house prices peaked in Apr 2022. Property values there are down 29.27% since the peak.

The third fastest house prices falls were in Lower Hutt City. House prices are down 29.12%.

House prices in Queenstown-Lakes District on the otherhand are down nothing at all compared to the peak.

Westland District prices are down only 0.95% and Central Otago District are a measly 1.79% down.

So your properties might have done better or worse than the national average. It all depends on where your property is.

If you want to know how the property market is going, look at the number of property sales per year.

Property sales peaked at 100,108 in Jun 2021. They then fell to just 58,763 in May 2023.

That's right, here in New Zealand we were buying 41.30% fewer properties per year compared to the peak.

Today the number of property sales has started to recover. In the 12 months to Jul 2024 we bought 67,674 properties. So we are currently buying 8,911 more properties per year compared to the bottom of the market.

How fast will NZ house prices rise in the future?

Our standard assumption at Opes Partners is that Auckland house prices will increase 6% per year over the long term – compared with 5% for the rest of the country.

This is a slower rate than the market has experienced in the past.

Over the last 30+ years (Jan 1992 – Jul 2024) NZ house prices, excluding Auckland, increased 6.1% per year. House prices in Auckland increased 6.7% per year.

So the capital growth rates we use are ‘discounted’ by 0.7% - 1.1% percentage points.

These forecasts are roughly in line with independent economist Tony Alexander’s thoughts.

“It pays to remember that the long-term trend in prices is upward. Since 1992, on average New Zealand house prices have risen 7% per annum. I think we’re looking at 5% per annum going forward.”

To answer this question we look at where prices are higher or lower than we would expect them to be.

The blue areas are those where house prices are below where we would expect them to be. These areas are currently undervalued and will likely increase in value faster.

The red shows areas where house prices are higher than we'd expect them to be. These areas are currently overvalued and will likely increase in value more slowly.

The 3 most undervalued areas appear to be Wellington City, Auckland and Christchurch City.

The most overvalued areas are Mackenzie District, Queenstown-Lakes District and South Waikato District.

Auckland property prices appear to be 9.30% undervalued.

This suggests there is more potential for capital growth in Wellington City compared to Mackenzie District.

You can read about how we calculate this data on any of our property market pages. Like this one on the Auckland property market.

All investors know – there are lots of factors that influence the surge and sag of the property market.

One of the main ones is higher interest rates.

Right now interest rates, like the prices of everything else, are high.

Why?

Low interest rates during Covid-19 lockdowns sent inflation soaring above the norm.

On top of this the labour market was tight and international supply chains disrupted.

There was too much demand and too little supply in the economy.

It overheated.

Inflation peaked at 7.3% (June 2022), well outside of the Reserve Bank's 1-3% target band.

This forced the Reserve Bank to increase the OCR in an attempt to temper the economy.

The aim of hiking interest rates is to slow the speed of spending and let the pressure out of the economy. And there's more to come.

Read more about our interest rate predictions here.

Sure, it’s a tough market at the moment. Interest rates are high. House prices have stopped falling –but, they're not increasing much either. But, it’s not all doom and gloom. There are pros and cons in every market.

Or said another way, there is always something working for and against you in any market.

For example, working against investors in the market currently are:

• high interest rates, which are currently leading to poorer cash flows
• new lending rules from the Reserve Bank through the Debt to Income Ratios (DTIs)

On the flip side, the positives are:

• Cheaper property prices
• The number of properties available for sale has increased 140.37% (Aug 2021 –Jul 2024). So you've got a better shot at finding a property you want.)

And remember, it is likely that over the long term property prices will increase again.

Here's how house prices have changed year on year since REINZ started tracking that data in 1992.

As you can see from the above graph, property price growth regularly rolls up and down in cycles.

There is arguably nothing new about this most recent dip.

All stable asset classes – like shares and property – tend to go through cycles. Prices boom, peak, fall, and then recover and go through a boom again.