Richard Vaughan | B.Prop
Regional Director
As a topic that is front of mind for many New Zealanders, the country’s residential market remains a source of great interest and discussion – including around summer barbeques!
Several factors are set to shape the market as 2024 unfolds. We’ve put the crystal ball away and taken the time to observe some of the dynamics at play, including a potential paradigm shift in the market over the next few cycles following the Reserve Bank's decision to table debt-to-income limits. The ratios are designed to ensure financial stability and reduce the risk of excessive borrowing by limiting the borrowing capacity of potential homebuyers and potentially dampening demand. While the debt-to-income ratios will likely start to have an impact on the market immediately, we expect their greater impact will be felt in subsequent market cycles.
Dovetailing that change is the signalled easing of the loan-to-value ratio requirements. These limits were initially introduced to curb high-risk lending and cool the property market. However, with the aim of supporting economic recovery, the Reserve Bank is exploring relaxing these requirements. This potential move is expected to increase the accessibility of adequate mortgage funding and stimulate housing demand, particularly among first-time buyers.
Another significant factor influencing the New Zealand residential property market is strong positive migration. While we are experiencing high levels of departures in New Zealand, these are counterbalanced by higher numbers of new arrivals. This overall positive migration trend will inevitably lead to increased demand for housing, particularly in the major cities where there are more employment opportunities.
The Government has also flagged a swathe of initiatives designed to influence property market activities. For example, in response to stunted levels of investor-based activity caused by high interest rates, there is a suggestion that the bright line test timeframe may be changed. As part of its publicly-stated “first 100 days in power”, the National-led Government has also promised to introduce the Going for Housing Growth Policy. This policy aims to unlock land for new housing, build infrastructure to support new development, and share the benefits of growth through housing performance incentives for councils. While clarity on the details of this program is still needed, the initiative is likely to influence market sentiment in 2024.
Without question the New Zealand residential property market is poised for an interesting year. Many agendas and market drivers are in play, including the new government’s agenda and the Reserve Bank's focus on controlling inflation.
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