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Navigating the New Zealand Real Estate Rollercoaster: A 2024 Outlook

As we usher in the summer of 2024, the real estate landscape in New Zealand seems to be emerging from an 18-month-long winter, having experienced unprecedented lows following exceptional highs.

14 December 2023

David Findlay, who recently earned REINZ’s prestigious Top Manager of the Year for the country, and a veteran in the real estate sector with over two decades of experience currently leading Harcourts’ top Auckland Central office, JK Realty Group, shares insights into the market’s rollercoaster ride and what lies ahead for property investors and homeowners.

The past: peaks and valleys

Over the last three years, New Zealand’s real estate market has witnessed significant turbulence. Interest rates skyrocketed from 3.5 per cent to 8 per cent, house prices surged by over 25 per cent, only to plummet just as swiftly. Development costs soared by 50 per cent, yet pre-sales nearly disappeared for the past year. These fluctuations may shock those examining the market on a yearly or micro-level, but when viewed over the long term, the market appears more like rolling hills than towering mountains.

Despite recent challenges, individuals who entered the market pre-2020 continue to enjoy a positive position, according to the Real Estate Institute of New Zealand (REINZ). OneRoof’s statistics suggest that we stand at the onset of a new cycle, prompting the question: What does the real estate market have in store for 2024 and beyond?

The current landscape: signs of positivity

There is enough on the horizon to give investors and homeowners confidence that the market will move in a positive direction over the next few years. This isn’t an economist or financial advisory piece, but rather a finger on the pulse from Harcourts’ number one office in Auckland Central, with hundreds of listings and sales each year.

We are hearing the commentary from other business owners, top agents and big developers in the Auckland and wider real estate space, and are uniquely positioned to comment on real estate in New Zealand.

Open home numbers have more than doubled in the past four months, and auction clearance rates surged from 32 per cent to 64 per cent in the last quarter alone. Buyer sentiment has shifted towards the fear of missing out (FOMO), instead of fear of overpaying (FOOP), and developers are re-entering the market with a positive outlook for the short to medium term, feeling that land prices are at a level where they can now confidently buy and develop.

QV and REINZ report positive movements in prices and attitudes, with a 2.1 per cent growth in the last three months across the country, translating to an annualised growth rate of over 8 per cent. Auckland slightly outpaces the national average with a 2.7 per cent growth for the quarter.

I've spoken with Nick Mattison, director of Civix, one of the top planning and surveying companies in the country, and they are seeing uplift in the number of companies approaching them for consenting and due diligence, which is an optimistic sign for the upward movement the development market is indicating. Classic Group, one of New Zealand’s largest, top-quality construction and development companies, are similarly witnessing this uplift in enquiry and sales for their sites throughout the country, of which we are responsible for selling down the majority of their Auckland stock.

The future: a double-digit lift?

There is talk in the market of a double-digit lift in property valuations in 2024 and 2025, providing hope for property owners.

However, contradictory to this, the media can bring about confusion regarding market sentiment, highlighting articles referencing a stagnation of high interest rates and “blood in the water” in this competitive market, and to add to that a high inflation rate. For those new to the industry, or in the infancy of their development or property flipping journeys for example, this can be a fearful position to be in, especially with a short-term outlook where the risks of the project being undertaken are not fully understood, and potentially greater compared to that of an experienced developer with a solid track record and overall long-term stance.

The development rollercoaster ride: a case study

Examining the transformation of Mt Albert, an affluent neighbourhood where Harcourts JK Realty Group is based, illustrates the market’s volatility. In 2020, 1,000m2 houses sold for $1,500/m2 or $1.5 million, reaching $3.5 million at the peak, and stabilizing around $2.5 million today. Developers played a pivotal role, as high-level property sales cashed up families, creating a cycle of rapid growth.

In 2018, “entrepreneur” was the buzz word, with many believing they could take the digital world by storm and become successful. In 2021, “developer” was that buzz word, with many property novices believing it would win them easy money.

But just as quickly as making money, you can lose it. I have personally dealt with over a dozen pseudo-developers in 2021, who then asked us to on-sell for them in 2022, and unfortunately, this was at a loss of many hundreds of thousands. Many hard conversations were had.

Considering a development? The learnings

The learnings for anyone wanting to get into development, always have a plan B, don’t put all your eggs in one basket, and seek out an experienced, trusted real estate partner before you begin your project to best guide you on the market fluctuations, and most importantly, to support you with the design of the product for the demographic buyers in mind - so that come sell-down day, your agent can confidently bring you the best price to make all your hard work worth it.

The present: an upward trajectory

OneRoof/NZ Herald, REINZ, and economists all point to July 2023 as being the turning point for the New Zealand real estate market. We have, in the residential and development space in Auckland, seen that as well.

But as I write this, in mid-November ‘23, it’s been a bit of a false start in terms of volume. We’ve seen a positive change in enquiries in many of the buyer categories: first-home buyers, investors, up-sizers, down-sizers and developers. But I estimate that only around 20 per cent of this increase in enquiries will end up as purchases.

There are a huge number of properties coming to market early 2024, and this will release some of the bottleneck that has been caused by the pent-up buyers and sellers of 2023, with the buyers who have had the luxury to negotiate price to date but haven’t had a fair selection of choice; and with the sellers who have been hesitant to move forward with the sales of their properties due to the uncertainty in the financial market and change of government.

Leading NZ’s market charge

Queenstown leads the market resurgence, closely followed by Auckland, Christchurch, and Wellington respectively. Surrounding regional areas may experience the positive trend in the coming months, following their key cities.

Final thoughts: navigating real estate uncertainty

Having worked in the industry for 20 years now, I can assure you that it’s never a bad time to buy if you’re not looking to flip and sell within 24 months; and it’s never a bad time to sell if you’re buying and selling in the same market. While expectations are for stable growth in the coming years, the unknown factors of inflation and interest rates loom, and we all can’t help wishing we had a crystal ball. As the market continues to evolve, staying informed and strategic remains key for homeowners and investors navigating the New Zealand real estate rollercoaster.

Planning to succeed: your real estate goals

I’m passionate about the industry, so if you are interested in further discussions on the New Zealand real estate market or would like to discuss your specific situation and goals, please don’t hesitate to drop me a line at David.findlay@harcourts.co.nz or give me a call on 020 444 5550.

Visit us at jkrealty.harcourts.co.nz

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.


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