Property Market
Private Property issue #126
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Property Market
3 min read
The Real Estate Institute released new data this week.
It shows that house prices were flat in August. That ends a 5-month streak of falling house prices.
Here’s a quick recap of the rollercoaster that is the NZ property market –
House prices peaked in November 2021.
They then fell 17.8%, bottoming out in May 2023.
House values then started to go up.
They peaked again in February 2024 … then fell for another 5 months.
That brings us to August’s data.
House prices are now 16.7% below their November 2021 peak.
They’re not as low as the bottom of the market. But it's not far off.
I’m calling this a “2nd chance bottom of the market”.
If you missed the first one in May 2023. This is about as close as you might get.
That’s not to say that a flat market in August means prices have definitely bottomed out again.
After all, house prices could still fall this month.
One day of sunshine doesn’t make a hot summer.
But there are other signs that we could soon be in recovery mode.
The first is the speed banks are cutting their interest rates.
Kiwibank’s 1-year rate was 7.35% at the start of the year.
They’ve cut that 6 times in less than 9 months.
The latest cut was earlier this week. Their 1-year rate now sits at 6.29%. A 1.04% total cut so far.
That saves $81 a week on a $500k mortgage (paid off over 30 years).
And there’s good reason to think those cuts will continue.
The US Federal Reserve cut its rates this morning. This is the first time they’ve cut rates in 4 years.
This will make it cheaper for banks to borrow and lend money to you and me. They’ll likely pass those savings on to us through even lower interest rates.
On top of that, inflation is coming down.
Remember, interest rates are high because inflation is/was high.
The economy ran too hot, and the cost of living went up over 7.3% in a single year.
That’s way outside the 1-3% band the Reserve Bank targets.
Those cost of living rises (inflation) have fallen to 3.3% in the last year.
All major banks expect that inflation will be back in the target band (1-3%) the next time the data comes out. That’ll happen next month on 16th October.
So, interest rates will likely continue to fall.
Lower interest rates are already flowing into more people showing up at open homes.
4 months ago, a net 45% of real estate agents said fewer people were turning up to open homes.
Now, it’s gone the other way. A net 42% of agents say that more people are turning up to open homes.
This measure tends to jump around a bit. But, lines up closely to the peaks and troughs of property prices.
There’s one other important trend to look out for – Spring.
It’s not that surprising that property prices fell in March – July.
The housing market is always quieter in Autumn and Winter. That’s when house prices are more likely to fall.
Now, we’re getting into Spring and Summer. That’s when house prices are more likely to rise.
So, take the falling interest rates and add the natural seasons of the market. What do you get?
The property market is in the early stages of recovery.
A couple of things need to happen to lock in the recovery:
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.