Housing supply high – but not oversupplied nationwide, according to BNZ
New Zealand’s housing market is awash with listings, both for sale and rent – but BNZ chief economist Mike Jones said the market is not necessarily oversupplied.
“The national housing market overall appears more balanced than oversupplied,” Jones said in his latest note.
Unsold real estate inventory has climbed back to 10-year highs. But Jones said this is more a return to long-run averages after a period of extremely tight supply between 2016 and 2022.
“Prospective buyers clearly have much more time and choice than they have for some time,” he said.
Despite rising demand from falling mortgage rates, inventory hasn’t fallen.
“Listings have at least kept pace with sales, leaving the market closer to a state of broad balance. Outside of parts of the South Island, there’s been scant pressure on house prices to rise.”
Recent commentary from other property economists supports the view that buyers are gaining leverage.
“There is still plenty of stock there, particularly in the main centres, good pricing and low interest rates… if people can get into the market for their first home now is a good time to do it,” said REINZ acting chief executive Rowan Dixon.
Market indicators support slow house price growth
Indicators like days to sell and sales-to-listings ratios continue to point to a subdued price environment, though some early signs of firming are emerging.
“Indicators of housing market balance… remain consistent with a slow growth environment for national house prices,” Jones said. “That said, a firming trend is starting to become more evident in both.”
CoreLogic chief economist Kelvin Davidson agreed the current window of lower interest rates has not led to the typical price surge.
“There’s a window where financing is cheaper, but it hasn’t quite flowed through to house prices as it might have done historically,” Davidson said.
Auckland and Wellington most well-supplied
At the regional level, Jones said unsold inventory remains elevated in Auckland, Wellington, Waikato, and Otago. These areas consistently rank at the looser end of supply measures.
“Those regions occupying the relatively looser (more inventory) end of the spectrum are Auckland, Waikato, Wellington and, surprisingly, Otago,” Jones said.
In contrast, tighter markets with less supply include Southland, Bay of Plenty, and Hawke’s Bay.
Rental listings up sharply – vacancy rates highest in major cities
It’s not just homes for sale – rental listings have jumped too.
“Total available rental listings on Trademe are 31% higher than May last year,” Jones said, “which, in turn, were 41% higher than May of 2023.”
Vacancy rates have climbed most in the major centres.
“Wellington and Auckland again come in at the top (higher vacancy rate) end… rental price inflation in these two regions has been the lowest of anywhere and is now negative on an annual basis (for new tenancies),” Jones said.
Other regions with looser rental supply include Northland, Canterbury, and Manawatū. The tighter end includes Gisborne, Taranaki, and the Bay of Plenty.
Townhouses dominate in Auckland and Canterbury
Data showed a growing share of the housing stock – especially in Auckland and Canterbury – comprises townhouses and new builds.
“The share of property listings for sale that are townhouses in both Canterbury and Auckland is between 10-15%. The average across all regions is 4%,” Jones said.
In Canterbury, townhouses make up 28% of Christchurch rental listings. In Auckland, the figure is 15%.
“New builds comprise 25% of Auckland listings and 20% of those in Canterbury,” Jones said.
That pipeline stems from the construction surge of recent years. While townhouse consents have slowed, they still account for 54% of consents in Auckland and 37% in Canterbury.
Expect a ‘multispeed’ house price response to lower rates
Summing up, Jones said the data supports a varied outlook for price gains across regions.
“All of this tends to support the idea of a multispeed property market response to falling interest rates,” he said.
Regions with higher inventory – especially Auckland, Wellington, and townhouse-heavy markets – may lag in the house price rebound.
“Relatively higher inventories in the townhouse market and the housing markets of Auckland and Wellington may suppress or slow those regions’ participation in the modest bump in house prices we’re expecting this year,” Jones said.
Meanwhile, house prices are still down around 15% from their peak nationwide, with Wellington more than 25% lower and Auckland 21.6%.
“Houses are more affordable than they were... There’s a sense now that they’re as cheap as they’re going to be even if they’re not necessarily cheap,” Davidson said.
BNZ has projected that lower mortgage rates will save households billions, but economists continued to warn that financial stability remains critical.
“They might be able to afford the house at the moment but not if they lost their job,” said Infometrics CEO Brad Olsen.
