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OPINION: For the past 12 months there has been little movement nationally in either house prices or in residential rents.
Both are marking time in terms of movement. However, while house prices have declined from all-time highs over the past two to three years, before plateauing, rents are at an all-time high but are on pause.
Where house prices are heading is the topic of most interest to the public, but at the start of a calendar year there is little information that gives a steer of what is in store for the year ahead.
January sales are so disrupted by the holiday season it would put credibility to the test by seeing a ‘trend’ in the data.
What we can see more clearly with the release of the Real Estate Institute’s sales data for the full year (released in late January) is 2024’s trading compared with that for 2023.
What it shows is that the national median sales figure at year end was $750,000, $10,000 lower than what it was in 2023. During the year the national average price ebbed and flowed on a monthly basis, but in relative terms ended the year where it started.
The last really solid forecasts for house prices were made in the latter part of 2024. These had the Reserve Bank, and the average of the four major trading banks, settling for housing price growth in 2025 of around 7%.
Nothing material has changed since then, as even February’s fall in the OCR rate was anticipated and likely built into that 7% forecast.
Based on the national median price in December of $750,000, it means that if those forecasts are met by December this year the median price might well increase by $52,500.
Given that house prices have remained stable for potentially the past 2 years, growth of that order would mark a strong return of confidence in the housing market.
And for me, after February’s drop in the OCR, and the subsequent fall in mortgage interest rates, the only key driver now missing holding back stronger housing market activity is confidence in the economy.
Once that confidence returns, then price growth is on the cards.
While cautious about putting too much emphasis on the results of just one month’s trading data, a feature of the Real Estate Institute’s January’s report (released mid-February) was that 8 (or half) of the country’s regions reported year-on-year growth of their January median price. The two regions showing the largest decline in their median January price were Tasman and Waikato.
The rental market also experienced price stability in 2024.
Interest.co.nz’s Residential Property Report for 2024 had the national median rent for a 3-bedroom property remaining at $650 throughout the year.
Our data for Auckland had the weekly rent for a 3-bedroom home increasing across 2024 by $2 a week to $693.[I always focus on 3-bedroom property rentals as this is the most common sized property rented.]
Given the significant cost increases landlords experienced in 2024 (such as insurance and rates) the stability of rents over the past 12 months suggests landlords have been prepared to trade off rent increases with the benefit they receive from lower mortgage rates and the tax deductibility of expenses.
Quarterly rental surveys such as those produced by Interest.co.nz and our agency provide act as a factual counter to the cherry picking of ‘bad landlord’ stories that make headlines on social or commercial media which, contrary to these survey results, would have it rents are rising steeply.
Landlords are a key partner in housing the population. It is estimated a third of the population live in rented accommodation, and that 85% of the rented properties in the country are in private ownership – owning some 510,000 properties.
Private landlords being involved in housing is a good example of how private investment can add the country’s infrastructure base by relieving the Government of the need to invest massive amounts of State funding into community housing.
Peter Thompson, Managing Director,
Barfoot & Thompson