With sales volumes in the residential property market starting to normalise thanks to improved buyer confidence, elevated inventory still needs to be worked through before tangible traction is seen in values, and before the new-build apartment pipeline starts moving.

Bayleys’ head of Insights & Data, Chris Farhi says the firm’s latest Residential Market Update report confirms that there is a significant overhang of housing stock for sale and while there’s clear improvement in market confidence with interest rates reducing and Inflation back in the Reserve Bank’s target range, values are tracking sideways.

“Sentiment among our residential brokers is neutral in our latest survey, with choice taking the heat out of buyer decision-making and vendor price expectations often out-of-step with buyers and market-value evidence.”

The firm’s New Build Apartment Update report also stresses that once existing stock levels start to fall and there’s more urgency for buyers, off-the-plan sales will start to pick up for new projects.

“Apartments make up 5 percent of all new homes consented, but off-plan sales are still muted with pressure off buyers given they have a good selection of existing homes and recently completed new builds for sale in the market.

“To release capital for future projects, some developers are offering sharper discounts and stronger incentives to move inventory so while the market is expected to rebalance as the year unfolds, we’re not expecting appreciable value growth through 2025.”

Sentiment among developers suggests a new development cycle is on the way, according to Bayleys’ national director corporate projects and development land sales, Gerald Rundle.

“Tougher market conditions have stalled the new development pipeline, but there are signs of some recalibration with developers reconsidering options for high-value sites to avoid perceived overpriced, low-value housing stock.

“The Auckland Unitary Plan supports intensification in high-value nodes such as those around the new City Rail Link stations, with well-located sites demanding a strong residential development response to leverage amenity and connectivity advantages. Mature global markets support this type of high density development around transport hubs, where higher values reflect the strong locational demand.”

Rundle says enabling greater density housing through legislative and policy changes is one thing, but actually delivering this housing stock in the current economic climate is another.

“Central government directives require councils of our largest cities to meet housing growth targets by live-zoning for 30 years of development capacity and specifying density requirements around strategic transport corridors.

“But financing is still tough, and clever strategies will need to be employed to get the wheels turning.”

Some of the entrenched dynamics that drove the new-build and wider apartment sector for years have changed, with Rundle pointing out that legislation restricting foreign ownership, falling net migration rates and declining foreign student numbers have changed the playing field and impacted off-plan sales for new initiatives.

Bayleys’ national director residential projects, Suzie Wigglesworth says there’s been a noticeable uptick in new residential housing development considerations, which is a change from last year and signals movement into the next development cycle.

“Existing Resource Consents are being dusted off and reviewed for relevancy, and developers are starting to brief architects on what a viable scheme might look like today.

“In Auckland, there’s also increased focus on inner city and city-fringe locations reflecting that the city’s housing supply has to evolve, with high-profile transport nodes being a catalyst off the back of government and council directives for higher density residential options.

“We’ve also noted a move away from smaller boutique schemes to larger apartment developments which give developers economies of scale, and greater profit margins.

“In this new development cycle, 40-100 unit projects are gaining some traction, whereas at the tail end of the last cycle, smaller more bespoke developments dominated, plus the vast majority of pipeline activity is now coming from bigger developers who have been through boom and bust cycles before.”

Active in the Queenstown residential project development sector, Wigglesworth says there are some valuable lessons to be taken from that market where demand for properties sub-$1 million is humming.

“It’s about understanding the target market and where demand is coming from. The affordable housing segment of the market has performed well in Queenstown, with projects being launched, sold down off plans and completed in a timely fashion.

“Gibbons Co’s 5 Mile Villas project at Frankton is a flagship example of delivering market-relevant product. It offers 226 architecturally-designed standalone, freehold 2-bedroom, 1-bathroom homes with their own backyards and with prices starting in the late-$800,000s.

“Clever design and product choice enabled construction efficiencies across that volume of homes and we recently had 250-plus people through an open day on-site which speaks to market demand.”

Wigglesworth also points to the BTR development model which has potential to expand the concept of what rental homes look like and the sort of community that can be fostered.

“Resido, which opened last year in Sylvia Park, Mt Wellington, is Kiwi Property’s first build-to-rent project. The 295-unit development across three towers is pet-friendly and offers a range of amenities including a gym, rooftop BBQ and entertainment area, co-working facilities, residents’ lounge and dedicated dog exercise park.

“This is a standout example of clever residential development which leverages locational advantages, redefines the definition of ‘home’, and stands to really change the housing market by delivering new options into the market.