What Does the 2024 Housing Outlook Mean for your Mortgage?

As the new year begins, many are wondering what the property market holds in 2024, particularly when it comes to mortgages. By understanding the outlook of the New Zealand housing market, you can optimise your financial decisions and make well-informed decisions about property purchases, selling your house, or refinancing your mortgage. Let's take a look at what the first impressions of 2024 may be and what it could mean for your mortgage.

Housing in New Zealand: Supply and Demand

Recent data suggests that the supply of housing is decreasing, which could potentially lead to a surge in prices. According to the latest statistics via economist Tony Alexander, the number of consents issued for new dwellings reached a peak of 51,000 in May 2022 but has since dropped to 39,900 in the year to October 2023. This downward trend is expected to continue, with estimates suggesting that the annual total may fall as low as 30,000.

2024 housing outlook

Some key reasons for the decline in new supply are the rising costs of construction, and the increasing number of Kiwis who are leaving the country, some of whom may own homes but won’t be looking to sell.

Kelvin Davidson, Chief Property Economist at CoreLogic, highlights that the past year saw the lowest number of homes listed for sale in four decades, totalling 65,000. Nevertheless, a recent trend indicates more homes coming onto the market, presenting more options for prospective buyers. This upturn may be influenced by investors aiming to sell additional properties following the reduction of the bright-line test from ten to two years, effectively sidestepping capital gains tax implications.

On the demand side, the potential of falling interest rates is expected to drive housing demand in the coming year. However, it is difficult to predict when monetary policy will start easing or how much the official cash rate will be cut by.

Increased migration numbers will also add pressure. New Zealand has had a jump in migration numbers. Over the past year, 100,000 more people entered the country than left – which was the biggest rise in decades. Kiwibank chief economist Jarrod Kerr says New Zealand “will not build enough homes” for the influx of new migrants.

Interest Rates and Unemployment

The current unemployment rate is 3.9%, but it is anticipated to reach 5% by the end of 2024. While consumer confidence may fluctuate throughout the year, discussions about rising unemployment and a weak economic outlook will likely make potential home buyers more cautious. Despite concerns about business closures in certain sectors, employers’ primary concern is a lack of staff and limited options for recruitment. Although some sectors are experiencing excesses, employment opportunities are expected to remain strong.

According to ANZ’s Business Outlook Survey for 2023, a net 7% of businesses plan to hire more people in the coming year. This result is the strongest since April 2022 and a significant increase from the net 16% of businesses intending to lay off employees at the end of 2022.

On November 29, the Reserve Bank of NZ (RBNZ) maintained the OCR at 5.5% and made it clear that any rate cuts were not on the horizon. An announcement regarding this decision is due at the end of February. Although the RBNZ acknowledged that high-interest rates were constraining spending and consumer prices were decreasing, it expressed the view that borrowing costs must remain high for an extended period. The RBNZ is not forecasting any rate cuts until early 2025. According to the RBNZ, the current OCR level is limiting demand, but it is still concerned about ongoing excess demand and inflationary pressures.

In light of this uncertainty, Tony Alexander recommends either floating and waiting for lower rates or doing what he tends not to favour and fixing for just six months.

The Current Housing Market

House prices stalled at the end of 2023 but a small amount of growth is expected in 2024. The housing market is slowly gaining momentum, with new figures showing average property values have increased by more than 2 per cent over the past three months. CoreLogic’s national House Price Index (HPI) shows a 1 per cent rise in property values in December 2023, on top of a 0.7 per cent gain in November and a 0.4 per cent increase in October. The gains were widespread across the main centres with Tauranga, Auckland, and Christchurch all registering increases of more than 1 per cent in December.

The Role of Government Policy in 2024

Policy changes by the new National-led Government will reintroduce investor-friendly tax measures, meaning first-home buyers could face more competition for houses. Read our previous article about some of these new policies. Regulatory shifts affecting lending practices and property taxes might also come into play. By keeping your finger on the pulse of policy changes, you’ll be in a better position to navigate the property market’s twists and turns.

How Rapson Loans and Finance Can Help

It is important to remember that the housing market is subject to a range of factors, including economic conditions, government policies, and global events, all of which can impact supply and demand in unpredictable ways. Ultimately, anyone looking to buy or sell property should keep a close eye on market trends and seek the advice of experienced professionals. Contact us today for advice on your mortgage and loans. Tauranga’s Rapson team is here to guide you through the intricacies of policy changes in the real estate market.