Falling interest rates build housing market positivity

Falling interest rates are helping to stoke more positivity and condence in the housing market, the Real Estate Institute says.

Its data for September shows house values lifted 1 percent month-on-month, on the institute’s price index measure, and dropped 0.4 percent year-on-year.

On an average basis, values have lifted just under 5 percent per year over the past ve years.

Jen Baird, Real Estate Institute chief executive, said the market was subdued but there were signs that a gradual recovery would take hold into 2025.

“After the Reserve Bank reduced the OCR rate by 50 basis points to 4.75 percent, the market is expected to see more activity from those who are ready to buy, reinforcing the optimism in the market, and this will likely be reected in the coming months’ property reports,” she said.

In the year to September, eight of the 16 regions that the institute tracks had an increase in median sales price.

Gisborne had the biggest, up 10.1 percent to $605,500. It was followed by the West Coast, at 9.9 percent to $390,000.

The total number of properties sold nationally decreased by 1.1 percent compared to September 2023, down from 5881 to 5816. Compared to August 2024, sales counts decreased by 3.3 percent from 6015 to 5816.

But excluding Auckland, sales were up 4.5 percent compared to a year earlier.

Buyers still have signicant choice. The level of inventory in September was up 27.4 percent compared to September 2023 and up 1.5 percent compared to August, with 30,028 properties for sale.

“Local salespeople around the country have noted an increase in buyers attending open homes, more so than the usual spring lift we see each year. With some regions now seeing an uplift in sales (seven out of 16 regions), buyer engagement is improving, with listings receiving more enquiries. These trends could lead to a more robust market in the coming months, particularly if expected improvements in market activity and reductions in interest rates eventuate,” Baird said.

Westpac economists agreed the market was showing “early signs of stirring.”

“Mortgage rates have fallen signicantly since the Reserve Bank signalled its shift to an easing bias in July, with the average oneyear xed rate down by almost 100 basis points. This has helped to revive interest among potential buyers, with evidence of a lift in loan applications and increasing open home attendance,” they said.

“This increased buyer interest is coming up against an existing glut of unsold homes on the market. However, there are some signs that the market is rebalancing. Data provided separately by realestate.co.nz shows that the number of listings remains at a nineyear high, but appears to be plateauing, with a small decline in Auckland. The average time to sell has increased substantially in recent months, suggesting that homes which have sat on the market for a long time are nally starting to move.”

ASB economists said banks were also lowering the test rates they use for mortgage applications, which would provide a market tailwind.

“This is particularly helpful for rst-time homebuyers who are in the position to make a purchase, encouraging them to enter the market before it shifts. In saying that, there are still numerous headwinds facing the housing market, with some even worsening, particularly the labour market and immigration inflows.

“At least for the time being, the market will remain favourable for buyers. As a result, we are unlikely to witness any fear of missing out or hasty or hasty decision makers from purchasers. Bringing it all together, we still expect prices to end 2024 flat to modesty higher. We expect a more significant house price recovery will become more evident over 2025 when sales activity has strenthened enough to overcome the weight of stock on the market and buyer confidence rises.”