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Everything you need to know is included in our New Zealand Property Pack
Are you considering buying real estate in the land of Kiwis? Are you questioning whether now is the best time to proceed?
Market timing is a subject where everyone has their own take. Your New Zealand acquaintance might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Auckland, might have a different view and recommend waiting for more stability.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in New Zealand, we believe in solid evidence and concrete data, not mere opinions or rumors.
After thoroughly analyzing official reports and statistics available on government websites, we have gathered solid information in a database. Here are our findings that can assist you in determining whether it's the right time to invest in real estate in New Zealand.
Ready? Let's go!
How is the property market in New Zealand these days?
New Zealand is, today, an exceptionally stable country
Positive
Stability is crucial for property buyers in a country, as it offers security, protects investments, and creates a nurturing atmosphere for progress and contentment. It is an information you need as a foreigner looking to buy a property in New Zealand.
You probably already know that New Zealand is an extremely stable country. The last Fragile State Index reported for this country is 17.5, which one of the highest scores in the world.
New Zealand has strong democratic institutions and a well-developed economy, which have helped to create a stable political and economic environment. Additionally, the nation has a strong commitment to social justice, which has helped to ensure that its citizens enjoy a high quality of life.
All good for the stability. Now, let's redirect our attention to the economic forecast.
New Zealand will keep growing steadily
Positive
Before investing in Real Estate, look into the economic health of the country.
As per the IMF's forecasts, New Zealand will end 2023 with a growth rate of 1.1%, which is not bad. Concerning 2024, the figure we're looking at is 0.9%.
This steady growth might keep going since New Zealand's economy is expected to increase by 8% during the next 5 years, resulting in an average GDP growth rate of 1.6%.
A moderate growth rate in New Zealand is a good thing for someone who wants to invest in a property in this country because it indicates a stable, predictable market and a steady increase in the value of their investment over time. Additionally, moderate growth is less risky than rapid growth, so investors can have greater confidence in their investments.
However, GDP growth is not the only metric to look at.
New Zealand business owners don't have faith in the economy
Negative
GDP growth is great, but it may not fully encompass all the expectations of businesses in property market. Luckily, in New Zealand there is an official metric that is frequently updated. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI) is the name given to this metric, which relies on surveys and assessments of business leaders to gauge their confidence in the present and future economic conditions.
The ANZ Bank New Zealand's data indicates that the Business Confidence Index is currently -31 for New Zealand.
This is not only the lowest score since 1974 for the country but also the worst score in the world. Why ? Because NZ businesses are grappling with multiple challenges such as increasing interest rates (the RBNZ has been aggressively raising interest rates to curb inflation), escalating costs, and diminished demand.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -56.
A lack of confidence among local businesses in New Zealand can lead to a cautious property market. Uncertainty about the economy may result in reduced investment and slower property price growth. Buyers might face fewer options and potentially lower demand, making it a challenging environment for property purchases.
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New Zealand is providing less building permits
Neutral
When you think about buying property in a country, it's worth paying attention to how many permits have been given for building houses and other properties. More building permits being delivered signifies trust in the property market, signaling a promising situation.
Unfortunately, the number of building permits granted is falling in New Zealand.
In the past year, according to Statistics New Zealand, the number of building permits delivered by the New Zealand municipalities fell by 1.1%, from 50,514 to 49,965 units.
Clearly, this is a negative sign. Let's explore further data.
One last point to consider - a decline in building permits directly affects the availability of properties. In such a situation, it is probable that housing prices will see an increase in New Zealand in 2024.
Property prices in New Zealand fall after Initial upsurge
Neutral
New Zealand's home prices have increased by 32.8% in 5 years according to Quotable Value.
It means that if you had bought a beach house in Queenstown for $1,000,000 five years ago, then it would now be worth around $1,328,000.
Recently, after a period of significant growth, property prices have experienced a subsequent decline in NZ.
A decline in property prices should not always be viewed as a negative signal. It could potentially indicate a market correction, presenting an opportunity for you to invest in a property in New Zealand at a discounted price.
You can find a more detailed analysis of the real estate prices in our property pack for New Zealand.
Everything you need to know is included in our New Zealand Property Pack
New Zealand's population is getting (a bit) richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In New Zealand, the average GDP per capita has changed by 4.6% over the last 5 years. Though not substantial, there is still a positive trend of growth.
This means that, if you purchase a scenic cottage in Queenstown and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in New Zealand cities such as Auckland, Wellington, or CChristchurch in 2024.
Properties promise modest rental yields in New Zealand
Neutral
Rental yield is a widely recognized metric in real estate investments.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in New Zealand is purchased for 600,000 NZD and generates 36,000 NZD in annual rental income, the rental yield would be 6%.
The website Numbeo indicates that rental properties in New Zealand promise gross rental yields from 2.3% and 5.0%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in New Zealand.
It suggests a satisfactory level of income relative to the property's value.
As previously observed, the supply of real estate will remain constant, indicating that property prices are unlikely to change. However, there might be a slight growth in the number of affluent tenants. Consequently, rental yields might increase in New Zealand in 2024.
Everything you need to know is included in our New Zealand Property Pack
In New Zealand, inflation is anticipated to be moderate
Neutral
Simply put, inflation is the continuous climb in prices.
It's when your go-to Kiwi burger costs 15 New Zealand dollars instead of 12 New Zealand dollars a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
According to the IMF's estimations, over the next 5 years, New Zealand will have an inflation rate of 12.1%, which gives us an average yearly increase of 2.4%.
This data infers that New Zealand could experience a moderate rate of inflation in the future. Then, prices would rise. It might become more expensive to buy in the future. However, if you buy now, your investment might appreciate and you can sell for a higher value later.
Is it a good time to buy real estate in New Zealand then?
Time to conclude !
2024 might not offer the most opportune conditions for property investment in New Zealand, as several unfavorable signals temper the positive aspects. Despite New Zealand's exceptional stability and projected steady growth, certain factors warrant caution. The recent fall in property prices after an initial upsurge raises concerns about the investment's potential for returns and stability.
Furthermore, the modest rental yields and the decrease in building permits offered by New Zealand's real estate market diminish the attractiveness of potential investments. While the population's increasing wealth and the anticipation of moderate inflation are neutral elements, the combined effect of these factors contributes to a more cautious investment outlook.
Significantly, the lack of confidence expressed by New Zealand business owners in the economy is a notable concern. This pessimism could have wider implications on economic activities, job security, and the overall investment environment, potentially casting uncertainty over the property market.
In conclusion, despite New Zealand's stability and growth prospects, the combination of falling property prices, modest rental yields, reduced building permits, and negative business sentiments suggest that 2024 might not be the most favorable year for property investment in the country. Prospective investors should carefully consider these indicators and their potential impact before making investment decisions.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in New Zealand.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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