The New Zealand housing market is experiencing a serious real estate crisis. This is caused by a drop in demand for housing and a huge drop in prices.
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.
