NZ Property Market Update

Updated every 3 months to let investors know what’s going on in the property market, right now.

LM b W

Laine Moger

Journalist and Property Educator for 6 Years

The Kiwi property market is a living beast. This means, year-to-year investors see big changes to the market, which is specific to each region.

While yearly round-ups are great, what many impatient property investors want to know is: How the market is behaving right now?

So every 3 months this article gets updated to see what’s going on in the property market, right now.

True to our data-nerd form, we’ve fashioned a few wee graphs to help talk you through what the data is telling us, and what these trends could mean for you.

Price Increases

How Quickly Are Property Prices Increasing Right Now?

Just in case you missed it, the property market has gone absolutely berserk in the past 12 months.

Property prices increased 27.22% in 2021 (November ’20-’21).

And, as you can see from the graph below, NZ property prices have never grown this quickly before.

This chart shows how quickly property prices increased over the prior 12 months.

Before 2020, the fastest increase was between Feb ’03-’04. Over that year property prices rose 24.13%.

More recently, annual growth set a new record hitting 30.62% (Aug ‘20 - ‘21).

As you can see from the graph, there was a slight decline into November, with annual house price growth starting to slow down.

Clearly that doesn’t mean no house price growth, but it is starting to slip away.

Long term, are we going to continue to see the same acceleration in house prices? Probably not. But that doesn’t mean we are still going house prices increase.

In our view, the heady highs of house prices going up by 30% are over. And a more normal level of market activity is likely to return.

That means house prices changing somewhere between -2% and +6% per year.

For a more in-depth conversation about predictions for the market, check out our Has the market peaked?’ article.


Who’s Buying All The Houses?

So, who are the buyers behind our hot-as-toast market?

According to CoreLogic, first home buyers are back in force.

A record high 26.4% of all homes bought during the months of July - September 2021 were purchased by First Home Buyers.

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Since the records began, mortgage investors have always purchased more properties than first home buyers.

However, now the tables have turned, and first home buyers are purchasing more properties than investors who are lending from banks.

Fastest House Price Increases

Where’s The Heat In The Market? Where Have Property Prices Increased The Fastest In The Last 12 Months?

Record high prices as a nationwide average is one thing, but we can see some wild growth within the individual regions too, some of which are soaring far beyond the 27% average.

Let’s take a look at the graph and see where prices are rising the fastest.

In the No.1 spot is: Waitomo District.

Property prices increased by a whopping 58.16% between November ’20 and November ’21, according to the REINZ house price index.

That saw prices rise from an average of $288k to $346k over that period, according to CoreLogic.

The key message here is that that while there has been a large percentage change, the actual increase is relatively small at $58k.

Waikato District also came in hot at a 47.43% increase, which saw houses almost tip the $1M scale. They currently sit at $950,000.

Similarly, Selwyn District – in the South Island – experienced an increase of 42.71%, with houses rising to $870,000.

Honourable mentions go to Tararua, Thames-Coromandel, Hauraki, and the Waimakiriri districts. These areas all saw annual growth of over 40%, according to REINZ.

So, what does this mean for investors? How should they respond to these changes?

Let’s say you own a property in Selwyn District. Because properties have gone up 42% in the area, you might like to take a relook at your equity position.

Thanks to this hefty rise you might be in more of a position to invest by unlocking some of that equity.

Fastest Rent Increases

Where Have Rents Increased The Fastest?

Like house prices, rents have increased quite considerably in some areas.

Our graph shows a clear delineation between the regions that saw a faster median rent increase in comparison to others.

The dark red patches show where median rents have increased the fastest. The blue shows where median rents have fallen, and the pale shows where there has been less change than others.

What’s telling here is the patchiness of the map. In other words, sometimes rents have increased quickly in one area, but its neighbour may have seen rents not increase that fast at all.

This happens sometimes because of the way we are measuring the change in rents. Because we are measuring the change in median rent, the figures can jump around, especially in smaller districts where fewer properties are rented month to month.

That does mean that a sharp change in the median rent may not be representative of what an individual property investor could put their rent up by.

Nonetheless, they’re still interesting to look at.

Mackenzie District saw the highest rent increase in the country, with median rents jumping from $205 to $330. That’s a huge increase of $125 extra a week.

Other front-runners in the South Island are the Clutha and Grey District, increasing 25% and 20.69% respectively.

In the North Island, Otorohanga District saw the largest increase with 32.08%, from $265 to $350, which translates to an extra $85 a week in rent for the median property.

This was followed closely by the second fastest climber: Upper Hutt City at 31.11%, which meant rents soared from $450 to $590.

So, what does this graph mean for investors and how do you use it?

Let’s say you're an investor in Upper Hutt City, and you can see from this map that the median rent increased from $450 to $590 (31.11%).

It might be a great time to review your rent. You might find that your property is currently rented out for lower than the market value.

For a more in-depth article on how much you can increase your rent click to our article.

It is important to note a certain amount of market flex in small towns is normal.

For example, these large price movements could be a result of a lot of 3-bedroom houses being rented out, rather than smaller 2-bedroom units.

But, still, it’s worth a look to make sure you are charging at the market value.

Here’s a good case study for how to work out what your rent could be, when doing your own research.


Where Might House Prices Increase More Quickly In The Future?

With all this in mind, where do we think house prices might increase most quickly in the future?

To answer this question we look at where prices are higher or lower than we would expect them to be. You can read more about this method on any of our property markets pages, like this one on the Auckland property market.

In terms of over and undervaluation, districts in Canterbury and the West Coast are the most undervalued, according to this analysis.

On the other hand, districts in Wellington and the Manawatu-Whanganui regions appear to be most overvalued.

This suggests there may be higher capital growth over the next few years in these Southern districts, rather than in the lower North Island.

Other Factors

What Should I Be Looking Out For As A Property Purchaser?

As all investors know, there are a myriad of factors that influence the surge and sag of the property market.

This means alongside keeping a track of market changes, there are some other things you should keep on your radar in the upcoming months.

Here are three of the headliners:

RMA Reform

In a nutshell, National and Labour have teamed up to scrap the rules which bind single-house zoning law in our major cities.

It’s designed to mean that more properties can be built on the same amount of land as before. And ultimately that means increasing the housing supply.

So, in some areas you could potentially bowl over one house and resurrect three in its place.

This is going to result in a lot more building in our inner-city suburbs, especially impacting: Auckland, Hamilton, Wellington, Tauranga, Christchurch and Selwyn.


Rising interest rates

There’s no missing the fact that interest rates are going through the roof. And banks are continuing to increase them week-on-week.

In fact ,during the last 6 months mortgage interest rates are up over 50%.

For the immediate future it is likely interest rates will continue to rise. While the market returns to a pre-Covid norm, and once inflation cools down a little bit.

Here at Opes our prediction for interest rates is that 1-year rates will hit 4.5%-ish – give or take a tenth-of-a-percentage-point or two.

If you want to find out how we arrived at this conclusion, visit our interest rate predictions article.

Declining market momentum

Media headlines love a good Doomsday prediction when it comes to the peak of the housing market. In reality, the declining market momentum tends to be a lot less catastrophic.

We’ve just seen a 38.90% increase in house prices between March 2020 and October 2021, and now banks, Treasury and the Reserve Bank are predicting a small decline in the price of properties in the short term.

While it's unlikely we are going to see that same amount of growth in 2022, it is likely that some regions of New Zealand will experience house price increases, while some others will start to decline.

Will the declines be as hefty as the likes of Treasury or the banks predict? No-one really knows, but it should be pointed out that Treasury house price forecasts tend to be conservative.

For instance, house prices have already surpassed what the Treasury forecasted they would be in 2025 (based on the early 2021 forecasts).

Read our Has the Market Peaked article for a more detailed discussion about whether or not the market has peaked.


Is Now A Good Time To Invest?

Here at Opes we always say: “The best time to invest in property is when you can”.

That’s because you don’t always have the opportunity to make an investment. Sometimes bank criteria will start to tighten, making it harder to purchase property.

So you may not always be able to pick the time when you can invest.

Nonetheless, first-timers are often hesitant, especially considering the amount of negative chatter circling about property in today’s market.

The key point is that there will be a reason not to invest. Today that’s DTIs, higher taxes, and LVR restrictions. Tomorrow it will be some other factor.

But, what has tended to be true, is that property, strategically bought and held for the long term, tends to increase in value, and delivers substantial gains for investors.

In other words, it’s time in the market that counts, not the timing of the market.

Or, as the old saying goes: “Don’t wait to buy property. Buy property and wait.”

LM b W

Laine Moger

Laine Moger has been a journalist and reporter for the last 6 years. She previously worked for Stuff, The North Shore Times and Radio NZ. She has a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism.