While the New Zealand economy is in recession, the property market showed some resilience in March with strong results seen across the LJ Hooker Group network.
Although there has been doom and gloom in the job market with pending job cuts widely reported, the real estate market has seen positive results for those looking to buy and sell.
LJ Hooker Group results
LJ Hooker Group saw a 27 percent month-on-month increase to March 2024 in sales across New Zealand.
LJ Hooker Group Head of Network New Zealand Campbell Dunoon attributes this growth to buyers and sellers seeing some stability in the property market.
“Throughout the past year there has been a lot of reason for uncertainty and to just sit on your hands and wait. We didn’t know if prices were going to fall further or if interest rates were going to increase. Sellers have come back to the market and buyers have more confidence in making a decision. Interest rates have reached their peak, so buyers have more certainty in their financial commitment,” Dunoon said.
Due to returning confidence, the number of listings across New Zealand is increasing. The latest Real Estate Institute of New Zealand data shows a 13.5 percent year-on-year increase in stock level across the country. Many homeowners are taking this opportunity to get an appraisal on their property to understand what it may be worth in this market.
“Most sellers have become buyers so have realised there are opportunities in this market. Some need to sell because they must relocate, for others it’s time to upsize or downsize,” he said.
Across the country, there was modest sales growth in areas such as Otago. In Dunedin, for example, our network saw a 50 percent increase in sales for March 2024 when compared to March 2023.
“While there were regions that achieved great results, across our network we saw a month-on-month increase in sales of 27 percent, and 16 percent when compared to last year. Properties are being sold, and our network has seen more people come through open homes and showing up for auctions,” Dunoon said.
Auctions remain a strong marketing option for those selling with LJ Hooker and Harveys, with 37.3 percent of sales in March successfully sold at auction. This was up from 25.6 percent in February.
“Property marketing is not a one-size-fits-all approach. However, auctions are a great opportunity to gauge interest and drum up excitement to get the best price for the sellers. The reason we are seeing successful auctions is because there is returning competition in the market. People are showing up at auctions with money ready to spend.”
Economic pressures
The economy continues to face challenges with the latest GDP results indicating our economy only grew 0.6 percent in 2023. Unemployment remains low and inflation is starting to ease, but not at a level that could give the Reserve Bank of New Zealand confidence to cut the official cash rate, which it held at 5.5 percent in April.
“While we are seeing a return of activity and interest to the property market, affordability remains a barrier for many of those wanting to get on the property ladder. This contributes to why demand is still at below-average levels,” Dunoon said.
However, buyer demand in some regions has shown resilience, contributing to rising prices over the past few months. CoreLogic's House Price Index reflects this trend, with a 0.5 percent increase in March and a cumulative 1.1 percent rise in the first quarter of 2024.
Building consents
Housing stock could start to be a factor in pushing up property sale prices and rental costs, as the number of new homes being built has dropped steadily.
According to data from Stats NZ, the number of new home consents is down 26.3 percent in the 12 months to the end of January 2024. There were 36,453 consents issued last year, down 13,027 from the 49,480 consents issued in the 12 months to January 2023.
“This is the lowest annual figure of new consents in five years. The decline in new builds will take some time to be felt in the property market but it could be felt later in the year as fewer new homes are available for sale,” Dunoon said.
Additional pressures
Immigration growth continues, with new arrivals eyeing up urban centres around New Zealand to call home.
“New immigrants calling our cities home is going to help stabilise property prices in those communities. This will also add pressure to the rental market” he said.
Additionally, proposed changes to the Residential Tenancies Act to see the introduction of ‘no-cause’ termination to end a tenancy after a fixed term will benefit landlords in this current rental market.
“Under current rules, a landlord would need a sufficient reason and notice period to be able to give their tenants notice. The proposed change will give the landlord more control over who lives in their property and the ability to move tenants on with 90-days' notice.”
Proposed changes include:
- Reintroduce 90-day ‘no cause’ termination for periodic tenancies
- Return landlords’ notice periods for ending a periodic tenancy to 42 days where:
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- They want to move themselves or a family member into the property, or
- The tenancy agreement states the property is usually used to house employees, and they want to move an employee into the property, or
- Where the property is subject to an unconditional agreement for sale requiring vacant possession.
- Return tenants’ notice period for ending a periodic tenancy to 21 days, and
- Reintroduce landlords’ ability to give notice to end a fixed-term tenancy at the end of the term without requiring a specific reason.
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