We can look at what we know now and use that to make some predictions about how the year will unfold.
The good news: there are still strong value drivers in place. Unemployment is still low, the softening of property values is lowering the barrier to entry for first home buyers, and New Zealand is back into a net migration gain. These are all historic drivers that support value levels. There’s also been an overall growth in building consents for new builds, and a rapid growth in multi-unit home consents, which includes townhouse or unit stock – now the largest consented dwelling type.
But we also have headwinds. Strong inflation – and the accompanying OCR increases – typically contribute to a cooling of values. The majority of fixed rates in New Zealand are to be re-fixed in the coming twelve months, which may cause uncertainty in market. Potential buyers may take a cautious ‘wait and see’ approach, especially in the lead-up to the election.
Although some parts of the market are beginning to ramp back up again, sales volumes are expected to continue to soften this year. Nationwide, values are likely to end up somewhere around 15% below peak levels (this number will be higher for some urban centres, such as Auckland and Wellington). At this stage, it’s too early to see the impact on property values in the Hawkes Bay and Gisborne as an effect of Cyclone Gabrielle.