Independent economist Tony Alexanders latest article highlights major forces influencing the New Zealand housing market in 2024.
In a housing market poised for a rollercoaster ride, independent economist Tony Alexander unravels the intricate dance between supply, demand, and policy shifts that will define New Zealand's real estate landscape in 2024.
1. Supply Squeeze:
Picture this - the supply of new houses hitting the market is not just slowing down; it's doing a dramatic slow down, with consents issued plummeting by a staggering 21% in the past year. And that's not the only twist – a smaller proportion of these consents are translating into actual constructions. The net gain to our housing stock? A mere 1%. Brace yourself; the quest for affordable housing might just be facing its toughest challenge yet.
2. The Rate Riddle:
Independent economist Tony Alexander: "It is looking like the Reserve Bank has kept the Official Cash Rate too high for too long."
The stage is set - interest rates are expected to take a nosedive in 2024. Has the Reserve Bank been playing a high-stakes game for too long? Inflationary pressures easing off might just be the cue for a new cast of homebuyers to enter the scene. As mortgage rates become the leading players, the housing market, already witnessing a steady rise in prices since June, could be in for a captivating encore.
3. Tax Twist:
Cue the drumroll for a significant plot twist arriving on April 1 – investors will be able to deduct a whopping 80% of their interest costs from rental income. It's a game-changer, echoing a slow comeback for investors who took a step back in 2021 after rule changes. Could this be the redemption arc for the investor buyers?
4. Migration Mayhem:
In the midst of this housing spectacle, a record net migration surge of 129,000 people in the past year takes center stage. The influx of new residents is tightening the squeeze on available accommodation, potentially propelling rents skyward. Rising rents are like a siren call, luring tenants into the realm of property ownership and adding another layer to the unfolding drama.
5. Unemployment Undertow:
However, not all is smooth sailing. A potential rise in the unemployment rate, from a current 3.9% to an anticipated 5%, could add a touch of suspense. While job numbers are still expected to rise, whispers of increasing joblessness might prompt some to hold back from entering the property market, creating an unexpected twist in the narrative.
In this intricate dance of market forces, the average pace of house price growth in 2024 promises to outshine its 2023 counterpart. As cities take the lead, driven by migration flows, the rest of the country may soon find itself caught in the rhythm of rising prices, turning this housing story into a captivating saga with unexpected twists and turns.
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