Balanced housing market cools prices, rents fall slightly
New Zealand’s housing market looks more balanced than in recent years, with supply now outpacing demand in Auckland and Wellington. This shift is easing price pressures and even driving a rare decline in rents, according to Cotality chief economist Kelvin Davidson (pictured).
Supply outpaces demand in key centres
Davidson said Cotality research shows dwelling stock has grown faster than population in the two largest cities, keeping values subdued.
“Supply outpaced demand in Auckland and Wellington in the five years to 2024, which is no doubt part of the reason why property values in those markets have remained so subdued lately,” he wrote for OneRoof.
By contrast, Hamilton and Tauranga saw stronger population growth than supply, explaining their price resilience. Other hotspots such as Waikato District, Selwyn, and Waimakariri also recorded strong supply increases, keeping affordability in check.
Queenstown remains an outlier, with affordability challenges persisting despite strong construction activity.
“That just shows yet again the unique nature of that market, with local and imported wealth a key factor,” Davidson said.
Overall, he noted that “supply and demand are better balanced than they’ve been for several years. No surprise, then, that shortage is just not a word you hear much anymore.”
Rental market sees rare decline
The rebalancing is being felt in rents. MBIE bond data shows the median national rent over the three months to July was $593 per week, down 1.1% from a year earlier.
“You still have to go back more than 15 years – around the GFC – to find the last occasion when rents fell,” Davidson said. “It’s pretty unusual for the rental market to favour tenants this much.”
Migration slowdown cools rental demand
Davidson pointed to lower migration as a key factor. Stats NZ reported net migration of just 13,000 in the year to July, less than half the long-term average of 30,000.
“There have been hints in the past few months that migrant departures have peaked and arrivals might just be starting to rise again. But it’s early days, and these figures can be subject to downward revisions,” he said.
Inflation and GDP in focus
Davidson highlighted two data releases this week that could shape the market outlook. Stats NZ’s August price indexes will give an early read on inflation trends.
“The recent upwards trend is something that the Reserve Bank is prepared to regard as temporary – hence the outlook for more OCR cuts,” the Cotality economist said.
Meanwhile, Q2 GDP figures are expected to show a contraction of up to 0.5%.
“It would obviously be a disappointing result. But as always, it’s old news, and there’s a sense that Q3 (and beyond) has been better, as the economy slowly starts to respond to lower interest rates,” Davidson said.
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