New Zealand Residential Real Estate Market Analysis 2024
New Zealand's housing market remains weak, amidst the continued increase in mortgage interest rates coupled with the imposition of stricter lending restrictions.
Table of Contents
- Housing Market Snapshot
- Demand Highlights
- Supply Highlights
- Historic Perspective
- Rental Market
- Mortgage Market
- Socio-Economic Context
Housing Market Snapshot
In Q1 2024, the nationwide house price index rose by 2.51% compared to the same period last year, following a y-o-y decline of 0.57% in Q4 2023, and annual declines of 4.06% in Q3 2023, 9.02% in Q2, and 12.06% in Q1, according to the Reserve Bank of New Zealand (RBNZ).
New Zealand's house price annual change
When adjusted for inflation, nationwide house prices declined by 1.45% y-o-y in Q1 2024.
Quarter-on-quarter, nationwide house prices were up by 0.09% (-0.55%) during the latest quarter.
According to the Real Estate Institute of New Zealand (REINZ), Auckland, which accounts for more than 30% of total property sales in New Zealand, is performing better than the national average. In Q2 2024, house prices actually increased by 4.8% from a year earlier - in stark contrast to the 12.5% y-o-y fall in the same period last year.
Taranaki saw the biggest house price growth, where the average house price increased by 10.7% y-o-y in Q2 2024, followed by Gisborne (7.0%), Canterbury (5.0%), Southland (4.1%), and Wellington (2.0%). House prices were steady in Nelson.
In contrast, huge house price falls were registered in the West Coast (-16.9%), Northland (-8.7%), and Bay of Plenty (-6.0%). Other regions with modest to minimal house price declines included Tasman (-2.9%), Waikato (-2.3%), Hawke's Bay (-2.6%), Otago (-3.8%), Marlborough (-3.9%), Manawatu/Whanganui (-0.9%).
Auckland remains the most expensive housing market in New Zealand, with an average price of NZ$1,048,000 (US$636,304) in June 2024. It was followed by Wellington and Bay of Plenty - both with an average price of NZ$780,000 (US$473,585).
The cheapest housing can be found on the West Coast and Southland, with average prices of NZ$320,000 (US$194,291) and NZ$440,000 (US$267,150), respectively.
| MEDIAN HOUSE PRICES BY REGION, JUNE 2024 | |||
| Regions | Median price | y-o-y change (%) | |
| NZD | USD | ||
| NEW ZEALAND | 770,000 | 467,513 | -1.3 |
| Auckland | 1,048,000 | 636,304 | 4.8 |
| Wellington | 780,000 | 473,585 | 2.0 |
| Tasman | 777,000 | 471,763 | -2.9 |
| Bay of Plenty | 780,000 | 473,585 | -6.0 |
| Nelson | 650,000 | 394,654 | 0.0 |
| Waikato | 720,000 | 437,155 | -2.3 |
| Northland | 630,000 | 382,511 | -8.7 |
| Hawke's Bay | 662,500 | 402,244 | -2.6 |
| Otago | 625,000 | 379,475 | -3.8 |
| Gisborne | 615,000 | 373,403 | 7.0 |
| Marlborough | 620,000 | 376,439 | -3.9 |
| Canterbury | 690,000 | 418,940 | 5.0 |
| Manawatu/Whanganui | 535,000 | 324,831 | -0.9 |
| Taranaki | 631,000 | 383,118 | 10.7 |
| Southland | 440,000 | 267,150 | 4.1 |
| West Coast | 320,000 | 194,291 | -16.9 |
| Source: REINZ | |||
New Zealand saw spectacular house price rises of about 114% (82.5% inflation-adjusted) from 2001 to 2007. Then after a pause, there were nine further years of substantial price rises of about 155% (114.6% inflation-adjusted) from 2012 to 2021, supported by strong demand and economic fundamentals. But house prices have started to decline in the second half of 2022 and have been generally falling since, amidst weak property demand.
Demand Highlights
Housing remains severely unaffordable, despite recent house price falls
New Zealand, particularly Auckland, was still rated as "severely unaffordable", according to the 2024 edition of Demographia International Housing Affordability report. Yet Auckland's median multiple actually declined to 8.2 in 2023, sharply down from 11.2% in 2022 and still lower than 10 in 2021 and 8.6 in the pre-pandemic year of 2019.
"New Zealand provides a hopeful path forward. Recognizing the crisis is rooted in high land values, new policies are proposed to open up sufficient land to accommodate demand," said the Demographia report.
"The newly elected Coalition government (National/ACT/New Zealand First) government plans to implement a housing policy, based principally on moderating the land costs that have skyrocketed in the urban containment policy environment over the past 30 years," added the report.
An earlier report by the Economist using its global house price index found that New Zealand house prices were about 40% overvalued relative to income. A report by Oxford Economics released before the pandemic ranked New Zealand as the fifth most at-risk among OECD nations. A 2022 report released by Compare the Market, ranked New Zealand as the sixth least affordable country to buy a house, with an "affordability ratio" - the cost per square metre as a percentage of income - of 17.8%.
Despite experiencing house price falls recently, residential properties in New Zealand remain 'somewhat overvalued', according to the country's central bank, Reserve Bank of New Zealand (RBNZ), in its Financial Stability report last year.
"Current prices are within the range of fundamental values suggested by some of the metrics we monitor, but the overall balance across indicators suggests prices remain somewhat overvalued," said the RBNZ.
In its May 2024 Financial Stability report, the RBNZ noted that lower house prices and strong nominal income growth have contributed to the fall in house price-to-income ratios since 2021, particularly in Auckland. However, said ratios remain elevated compared to historical levels.
In June 2024, property sales in New Zealand were down by a huge 25.6% to 4,356 units as compared to 5,854 units a year ago, according to REINZ. Sales counts in 15 out of the 16 regions declined in June 2024 from a year earlier.
- In Auckland, the number of properties sold was just 1,287 units in June 2024, sharply down by 35.1% from the same period last year.
- For New Zealand excluding Auckland, property sales fell by 20.7% y-o-y to 3,069 units in June 2024 from a year ago. The regions outside Auckland with the biggest annual decline included West Coast (-51.2%), Tasman (-41.7%), and Gisborne (-39.4%). The only region that recorded an increase in demand was Northland, with a y-o-y sales increase of 11.9%.
"The typical winter lull, compounded by current economic conditions, has contributed to lower levels of activity in the market. This sentiment is reinforced by seasonally adjusted figures, which reveal a national sales decrease of 11.1% compared to May 2024, reflecting a market performance below expected levels," said REINZ Chief Executive Jen Baird.
"As more listings come to a well-stocked market, those who are in the position to buy are taking their time to carefully select their ideal home," added Baird.
Nationwide, the number of days-to-sell decreased by one day from a year ago, to 47 days in June 2024. Northland had the highest days-to-sell at 71 days.
Over the same period, the total number of properties available for sale across the country was 31,745 units, up by a huge 28.6% from 24,676 units a year ago.
Likewise, total listings increased 25.5% y-o-y to 7,805 units in June 2024. Significant increases in listings were registered in Wellington (50.3%), Hawke's Bay (35.6%), Gisborne (34.8%), Bay of Plenty (33.6%), Canterbury (33.6%), and Auckland (33%).
"The increased number of listings coming to market continues the trend we have seen all year, with high levels of choice for buyers nationwide. The winter months do tend to see fewer people choosing to sell, and this year is no different," said Baird.
New Zealand's economy grew by a meager 0.6% during 2023, a sharp slowdown from annual growth of 2.4% in 2022 and 5.6% in 2021, as rising interest rates and high inflation weigh on private consumption. Prior to the pandemic, the economy has been growing robustly in the past decade, registering an annual average growth of almost 3% from 2010 to 2019.
Economic activity is expected to remain subdued this year, with the International Monetary Fund (IMF) projecting the NZ economy to grow by just 1% for the whole year of 2024.
Supply Highlights
Residential construction activity slowing rapidly
During 2023, the total number of new dwelling consents in New Zealand plummeted by 22.9% y-o-y to 38,209 units, in sharp contrast to annual increases of 1.1% in 2022, 24.3% in 2021, 4.8% in 2020, and 14% in 2019.
The weakness of residential construction activity continues this year. In the first five months of 2024, new dwellings consented totaled 14,199 only, down by 16.2% from the same period last year, according to Statistics New Zealand.
By region:
- In Auckland, new dwelling consents were down by 20.5% y-o-y to 5,723 units in the first five months of 2024.
- In Waikato, consents fell by 27.2% y-o-y to 1,143 dwelling units.
- In Wellington, consents plunged by 25.3% y-o-y to 884 units.
- In Canterbury, consents dropped 10% y-o-y to 2,677 units.
- In the rest of North Island, consents fell by 16.2% y-o-y to 2,027 dwelling units.
- In the rest of South Island, consents were down by 15% to 1,274 units in Jan-May 2024 from a year earlier.
Dwelling stock still increasing
Despite slowing residential construction activity, dwelling stock continues to increase. As of Q2 2024, New Zealand's total dwelling stock totaled 2,012,400 units, up by 1.8% from a year earlier, according to Statistics New Zealand.
As of Q2 2024:
- Owner-occupied: 1,298,900 units, up by 1.8% from a year ago
- Rented: 644,600 units, also up by 1.8% from the previous year
- Provided-free: 69,000 units, up by 1.9% from a year ago
Likewise, the total value of dwelling stock in the country increased by 3.6% y-o-y to NZ$1.63 trillion (US$990.12 billion) in Q1 2024, based on RBNZ figures.
Historic Perspective
A short history of New Zealand's housing boom
House prices in New Zealand surged by almost 114% (82.5% inflation-adjusted) from 2001 to 2007, including 24.8% in 2003, 12.2% in 2004, 15.3% in 2005, 9.7% in 2006, and 8% in 2007. Big rises - but then, this was a period when the economy expanded by an average of 3.8% every year.
House prices started to fall in early 2008, but the decline was much less than in other countries. After falling by 4.78% in 2008, house prices rose strongly by 9.59% in 2009 - but only to fall again by 2.22% in 2010.
Supported by healthy economic fundamentals, the housing market started to recover in 2011. New Zealand saw another housing boom in the following years, with prices soaring by 155% (114.6% inflation-adjusted) from 2011 to 2021, including double-digit price rises in 2016 (10.97%), 2019 (12.32%), 2020 (18.6%) and 2021 (21.48%).
The housing market started to weaken, amidst surging interest rates and the introduction of stricter lending criteria. House prices fell by 12.71% in 2022 and by another 1.29% in 2023.
| HOUSE PRICE INDEX, ANNUAL CHANGE (%) | ||
| Year | Nominal | Inflation-adjusted |
| 2008 | -4.78 | -7.89 |
| 2009 | 9.59 | 7.48 |
| 2010 | -2.22 | -6.01 |
| 2011 | 0.85 | -0.98 |
| 2012 | 9.58 | 8.55 |
| 2013 | 9.77 | 8.01 |
| 2014 | 5.39 | 4.59 |
| 2015 | 3.33 | 3.25 |
| 2016 | 10.97 | 9.51 |
| 2017 | 6.59 | 4.92 |
| 2018 | 1.82 | -0.07 |
| 2019 | 12.14 | 10.10 |
| 2020 | 18.63 | 16.95 |
| 2021 | 21.48 | 14.66 |
| 2022 | -12.71 | -18.59 |
| 2023 | -1.29 | -5.67 |
| Sources: REINZ, RBNZ, Global Property Guide | ||
Rental Market
Rental yields are moderate
Gross rental yields in New Zealand ranged from 2.43% to 5.72% in Q2 2024, with a country average of 4.29%, according to a Global Property Guide research conducted in June 2024. For apartments, rental yields averaged 4.40% while houses and townhouses averaged 4.17%.
In Auckland, gross rental yields on apartments are low, with rental yields ranging from 3.24% to 5.96% with a city average of 4.15% in Q2 2024.
Wellington, the capital city of New Zealand, attracts many ex-pats too. This city is prone to earthquakes but most buildings here are earthquake-proofed, especially the new buildings. The city's rental yield returns are low to moderate, ranging from 4.02% to 5.17%, with an average of 4.65%.
Things don't look better in Christchurch as well, with houses and townhouses offering gross rental yields ranging from 4% to 4.43%, with a city average of 4.19% in Q2 2024.
The rental market is a big deal in New Zealand - about 64.5% of New Zealand dwellings were owner-occupied in Q2 2024, while 32% were rented.
New Zealand rents continue to rise
Nationwide, the median weekly rent for private residences stood at NZ$650 (US$395) in May 2024, up by 6.6% from the same period last year and remains at its record-high level, according to Trade Me Property.
"It's been painful for renters in recent years. Following record-high rents, it looks like we're finally seeing some much-needed supply being injected back into the rental market. That's taking pressure off for those looking for a rental, with more options available," said the Trade Me Property report.
Likewise, Statistics New Zealand's national rental price index rose by 3.8% y-o-y in May 2024, at par with the prior year's growth.
By region, in May 2024:
- Marlborough saw the biggest y-o-y increase of 26.7% to reach a median weekly rent of NZ$640 (US$389). It was followed by Otago, with rents rising by 11.1% y-o-y to NZ$600 (US$364).
- Strong annual increases in median rents were also seen in Hawke's Bay (8.3%), Southland (8.0%), and Nelson (6.3%).
- More modest year-on-year rent increases were recorded in Bay of Plenty (4.6%), Canterbury (4.5%), Waikato (3.6%), Northland (3.4%), and Manawatu/Whanganui (1.9%).
- In Auckland, the median weekly rent for private residences also rose by a modest 4.5% y-o-y to NZ$690 (US$419).
- Rents for private residences were unchanged in Wellington and Taranaki.