Key Facts

  • Statistics NZ data shows a net gain of 129,000 people in New Zealand, despite a loss of 45,000 Kiwis offshore, due to a high influx of foreigners.
  • This population increase represents a 2.5% boost to New Zealand’s population and questions arise about its effect on the housing market.
  • The demand for accommodation is significantly increasing, whereas the supply, i.e. the number of construction consents for new dwellings, has fallen by 21% over the past year.
  • This disparity is likely to cause a rise in house prices and more significantly, a surge in demands in the rental sector.
  • The effect of a tight rental market might push more people towards home ownership.
  • At some point, falling interest rates will make property purchases more affordable, thus further increasing demand and upward pressure on prices.
  • Investor demand is also projected to rise with the full return of interest expense deductibility from April 1, 2025, bolstering demand and potential house prices.

Article Summary

Results from a recent report by Statistics NZ reveal a net population increase of 129,000 in New Zealand. Despite 45,000 locals moving overseas, the influx of foreigners to the country has counterbalanced the loss. Predicting how this population increase will influence housing prices is challenging due to the complex dynamics of supply and demand.

Currently, the demand for accommodation is on the rise, contrasting starkly with a declining housing supply, as indicated by a 21% decrease in new dwelling construction consents in the last year. This divergence is likely to drive prices upwards, with the rental sector anticipated to bear the brunt. Policies implemented by the Labour government to discourage people from venturing into rental accommodations now face a surge in demand, which, coupled with a decreasing supply, is likely to escalate rental prices.

The tightened rental market scenario could push more people to consider property ownership. Additionally, future falling interest rates could potentially make housing purchases more affordable, adding an extra dimension to the upward pressure on housing prices. The demand by investors is also likely to go up with the reintroduction of full interest expense deductibility by April 2025, further fuelling demand and housing prices.

In conclusion, based on this analysis, population increase combined with supply-demand forces and interest rate changes could lead to a substantial leap in housing prices in New Zealand by 2024.

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