In 2022, average house prices in New Zealand fell by 18.13% (adjusted for inflation) from a year earlier. This is all the more surprising when you consider that 2021 was out of the question – at that time there was a 14.02% increase in residential property prices.

In 2023, prices continue to fall – in January, housing sales in New Zealand fell 27% year-on-year (to 2,759 units). This is data from the Real Estate Institute of New Zealand (REINZ). This situation is influenced by many factors: rising interest rates, high inflation, recent changes to the Credit Contracts and Consumer Finance Act (CCCFA) lending rules, as well as global economic and geopolitical uncertainties.

The regions with the strongest January 2023 sales declines were Taranaki (-37.3%), Plenty (-37%), Northland (-36.3%), Waikato (-32.3%), Gisborne (-31.8%). Auckland (-29.9%) and Southland (-29%).

Moreover, it’s not just demand that is shrinking, but supply as well. In January 2023, there were 16% fewer new listings for housing for sale compared to the previous year (their number fell to 6,646 units). And housing sales are also quite slow: over the same period, the average number of days to sell a property was 53, an increase of 16 days compared to January 2022.

The situation with the prices of buying and renting housing in the cities of New Zealand is as follows (we are talking about apartments with 2 bedrooms in the center of the cities):

• Auckland: purchase price – $421,114; rental price – $1,259/month.
• Wellington: purchase price – $385,131; rental price – $1,417/month.
• Dunedin: purchase price – $278,663; rental price – $1,003/month.
• Christchurch: purchase price – $356,131; rental price – $1,081/month.

As for the New Zealand economy as a whole, its progress in 2022 has been modest, with economic performance growing by 2.3% in 2022, compared to 5.6%, in 2021. The International Monetary Fund predicts New Zealand’s economy will grow by just 1.9% in 2023.

In an attempt to curb inflation, the Reserve Bank of New Zealand is raising the official cash rate (OCR) – February 2023 was the tenth increase since October 2021. The rate now stands at 4.75%, the highest level in 15 years.

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In the center of megacities, on the coast of the Tasman Sea or the Pacific Ocean, in the area of ski resorts for the purchase will have to lay out a round sum. In remote regions there is an opportunity to buy housing at a reasonable price.

For example, buy a house in Wellington, depending on the area can be from 350 thousand dollars to 1 million and more. In Auckland, on average in the city one square meter will cost 3 thousand. In Tuaranga prices start at 150 000 dollars for a small house, luxury villa here can cost about 2 million.

How much will have to pay: taxes and maintenance

All homeowners in New Zealand are obliged to pay the city property tax, as well as monthly utility payments for the maintenance and servicing of the house. The amount of these charges depends on the size of the apartment or house, the location and the amenities inside. At times, payments can reach several thousand dollars a year. In order to know the exact amount of taxes and maintenance costs, it is recommended to consult a tax professional.

For example, paying for electricity in a small house will cost an average of $150 per month, water – $50. Due to the fact that the cost of electricity is quite high, many property owners try to dress warmly in the winter to avoid heating the entire house. If heating is still present, it is sometimes turned on locally – in certain rooms of the apartment or house.

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In the country there are several options for formalizing the transaction:

• Option. If the investor has decided on the choice of the object, but for some reason can not yet conclude a deal with the seller, he has the opportunity to conclude an option. Under the option is an agreement, according to which the seller during the period established by the two parties does not have the right to offer this object of real estate to other buyers. An interesting point is that an option is not a guarantee of purchase. After the expiration of the set period of time, the investor can withdraw from the transaction. The option is always paid by the buyer;
• Limited Offer. This type of transaction implies an agreement between the two parties that the buyer undertakes to pay for the property on a certain date. In this case, the investor can not simply refuse to buy, for this he will have to pay a penalty. The time before the set payment date gives both parties the opportunity to finalize all the necessary documents;
• Full Offer. A sale and purchase transaction without any additional conditions. With this option, the lawyers of both parties check the deed of sale and agree on all the details. Once the contract is signed, it is impossible to cancel the purchase of the real estate object.

In addition to this expense, the buyer is also required to pay a lawyer, the average amount is 250 dollars

If the final offer is realized, the buyer is obliged to pay the homeowner a deposit. Usually it leaves 10% of the value of the property. Of course, the amount is not paid directly to the seller. It is credited to a special bank account of the real estate agent involved in the transaction. Only after the entire sale procedure is finalized, this amount is transferred to the seller. Often an agent’s commission of approximately 5% is automatically deducted from this deposit.

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What happened. House price growth in New Zealand continues to accelerate, helped by ultra-low interest rates, which have reached an all-time low of 0.25%, as well as limited supply. On average, property in the country has risen in price by 16.77% over the course of 2020, up significantly from 10.28% in 2019. And, according to CoreLogic, there is no end in sight to this trend. From the third quarter to the fourth quarter, prices increased 7.62%.

Supply and demand. Despite the pandemic and subsequent blockages, interest in local real estate remains very high. According to REINZ (Real Estate Institute of New Zealand), home sales in the country rose 36.6% to 8,935 units in the year to December 2020. In Auckland, the figure was 66% (to 3,219 units).

Limited supply is putting further pressure on prices. In December 2020, the number of properties available for sale fell 29.1% year-on-year to 12,932 units. That’s the lowest level of inventory since record-keeping began.

Growth in construction activity is slowing, with new building permits increasing by less than 3% in the first eleven months of 2020. This is significantly less than the average annual growth of 14% over the past eight years, according to Statistics New Zealand.

Rent. Apartments in Auckland cost around $7,209 per square meter. To buy a spacious apartment of 120 sq.m. in the city center, you will have to pay about $412,571, and to rent such housing can be for $1,885 per month. The yield is 5.48% per annum.

Situation. The International Monetary Fund (IMF) estimates that New Zealand’s economy shrinks by 6.1% in 2020 due to blockages and travel restrictions related to the COVID-19 pandemic. This contrasts with solid economic performance over the past decade, with growth of 2.2% in 2019, 3.2% in 2018 , 3.8% in 2017 and 4.2% in 2016.

According to IMF forecasts, the economy is expected to recover by 4.4% this year.

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New Zealand is located on two islands – North Island and South Island

On the North Island lives about ¾ of the total population, so real estate is usually purchased in this region. The most popular cities are Wellington and Auckland. The climate here is quite comfortable, in winter the temperature does not fall below +10. There is almost no snow, except for the tops of volcanoes. The greatest demand is for houses and apartments. Families with children usually settle in houses. Pensioners, students and young couples prefer apartments.

South Island real estate is invested in by those who plan to rent out their homes to tourists. In this region is located in the southern Alps, where there are many ski resorts. Here are in demand villas and resorts.

The architecture of all buildings is quite minimalist. Simplicity of lines, functionality and lots of windows are the main features of almost all houses, villas and apartments.

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