Biggest trends

Wider residential market starting to recover

Independent forecasters are typically predicting house prices will rise over the next two years. Migration gains and constrained housing supply are likely to continue to drive long-term price growth. In the short-term, price growth has been constrained by the impact of high supply of homes on the market for sale.

Interest rates the one to watch

The Reserve Bank has recently lowered interest rates, with further reductions anticipated over time. Interest rates remain a key pressure point for buyers so the future pathway for rates will likely be the main influence on house prices in the short-term.

Law changes support investors

Policies put in place by the new government, such as restoring mortgage interest deductibility for rentals and wider termination rights for landlords, will increase demand from investors in the medium-term.

Outlook for the next 12 months

Rent growth slower due to softening migration

Net migration gains have reduced from recent historic highs. Rents are likely to continue to rise but at a more modest pace. This trend is particularly evident in the Auckland Region, where migrants tend to locate first where rental growth is already showing signs of slowing.

Returns bolstered by lower interest rates and law changes

Lower funding costs will mean improved equity returns for residential investors. Along with the policy changes, this is likely to translate to more acquisition activity by investors, alongside the already active first home buyers and movers.

Attractive yields on new builds

Experienced property developers are anticipating the market’s recovery and preparing for the next cycle. Many have residual homes to sell from recent projects, offering investors attractive opportunities with the new, Healthy Homes compliant properties often achieving good rental yields.