New Zealand: real estate market shows fall in house prices
New Zealand has shown an increase in property prices over the past 7 years. During this period, the cost of housing has almost doubled. During the pandemic, the appreciation was at 40%, but this year the dynamics began to decline. The reason was the increase in interest rates, as a result of which the real estate prices fell by 1,6% compared to the previous period.
The regulator began revising interest rates upward in October 2021. They have increased several times since then. According to the government, in 2023 interest rates will reach 4%. This situation has had a negative impact on the local real estate market, and in April the number of sales transactions fell by more than 35% compared with the previous year and amounted to 4860 contracts. At the same time, more objects available for purchase appeared on the market – a total of 27,050 housing units. The growth of this indicator compared to the previous period reached 70.8%.
Last quarter, the average price of residential real estate transactions increased by 4.2% to $850,000. The most expensive properties in the country are sold in Oakland, where the average home will cost $1.155 million. The cheapest place to buy a home is on the West Coast, where the cost is about $295,500.
Last quarter analysts recorded a decline in real estate sales in the New Zealand market by more than 38%. Weak volume primarily in Auckland – 43%, but the decline in contracts of sale of housing was also observed in other regions of the country. Although there were some, where sales conversely increased, such as on the West Coast, where the increase in transactions was 31%. The time to sell properties also changed, from 13 to 44 days, except on the West Coast and Gisborne, where the time was shorter.
Analysts predict that in the next month real estate prices will continue to decline, and the fall could reach 10%. The situation is aggravated by the risk of further increases in interest rates, which will affect the development of the real estate market. In addition, the sector is also affected by global processes, including record inflation. In this case, the Central Bank of New Zealand believes that in order to stabilize the segment prices should decrease by about 20%. Capital Economics and Kiwibank agree with the regulator. In their view, housing can be considered affordable if its value will fall by 20-30%. Analysts note that if declining trends in real estate prices persist for several years, by 2027 the cost of housing can be considered fair.