The New Zealand housing market has been a subject of keen interest in recent years, with soaring prices followed by a significant correction in response to central bank actions. HSBC Bank recently released a new report, adjusting its expectations for the remainder of this year and projecting a 5% annual growth rate until the end of 2024. In this blog post, we delve into HSBC’s housing market outlook and explore the factors shaping the current state and future trajectory of the property market in New Zealand.
- A Rollercoaster Journey:
The housing market in New Zealand experienced an extraordinary journey, with prices soaring over 45% between the end of 2019 and 2021, attributed to significant monetary and fiscal stimulus. However, a series of interest rate hikes initiated by the central bank led to a sharp correction, causing prices to decline. From October 2021 to mid-2023, the Official Cash Rate (OCR) was raised to 5.5%, totaling 525 basis points.
- Market Correction and Ongoing Impact:
According to data from the Real Estate Institute of New Zealand, housing prices nationwide experienced an 18% decline, with Auckland and Wellington witnessing more substantial decreases. Despite this correction, current housing prices remain approximately 25% higher than pre-boom levels, indicating sustained demand and a resilient property market.
- Observations from the Australian Market:
HSBC also highlighted the resilience of the Australian housing market, which experienced a stronger-than-expected recovery due to population growth, despite rising interest rates. The bank draws parallels and expects similar trends to manifest in New Zealand, where recent indicators suggest signs of stabilization and even minor price rebounds.
- The Role of Immigration:
HSBC Economist Jamie Culling emphasizes the likelihood of a robust demand for housing supported by a strong rebound in immigration. As immigrants flow back into the country, the housing market is expected to receive a considerable boost, further influencing demand dynamics.
- Balancing Sustainability:
While the central bank is striving to maintain housing prices at a sustainable level, HSBC notes that sustainability does not equate to affordability. Despite measures to control inflation and promote stability, the market remains somewhat inflated compared to other economic indicators.
The HSBC Bank’s housing market outlook for New Zealand presents an intriguing narrative of highs and lows, with unprecedented growth followed by a significant correction. As the property market enters a period of stabilization, indicators suggest signs of a gradual rebound, propelled by factors such as immigration-driven demand. With the central bank’s continuous efforts to strike a balance between sustainability and affordability, the future trajectory of New Zealand’s housing market remains a topic of keen interest for both homeowners and investors. As we move forward, it will be crucial to closely monitor developments and policy interventions to gain a clearer understanding of the housing market’s evolution.