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Bayleys market round-up

April has proven to be a busy month for the residential property market, with significant data releases and the push-pull of economic drivers creating new angles for analysis.

While continuing to regress year-on-year, the rate of value decline has eased across the country, leading many to surmise we may be at or near the trough of the residential market decline.

Data from various firms, including Valocity, Real Estate Institute of New Zealand, Quotable Value and CoreLogic, shows that Kiwi sellers are still better off than they were pre-pandemic, and there continues to be strong demand for well-presented homes in the right locations.

This improving market sentiment comes amid easing immigration controls and increasing net population gain, putting upward pressure on rental rates nationwide while providing a supportive demand factor for residential property values.

To put the market downturn into perspective, analysis from independent economist Tony Alexander found that average house prices have declined 1.1 percent each month since December 2021 in seasonally-adjusted terms.

At the same time, a one percent boost to the population will require an additional 19,000 houses while building consent data nationally is down nearly 20 percent year-on-year.

The numbers create an interesting juxtaposition between supply and demand, despite economic volatility continuing to impact buyer decision-making.

Rising demand fundamentals like migration and a lack of supply are an increasingly important feature of the market, potentially creating a fear or missing out amongst buyers eager to maximise the current trough.

On the financial side, the Reserve Bank of New Zealand’s (RBNZ) surprising move to increase the Official Cash Rate (OCR) by a larger-than-expected 50 basis points (0.50 percent) came before quarterly inflation data, which tracked downward.

Although some alarming features remain hidden amidst the metrics.

While core inflation – driven by global factors – moved lower, Kiwi feet remained on the accelerator of the local inflation pedal, continuing to push operating costs, including wages, upward. This underlying trend in price rises will contribute to persistently high inflation expectations for the coming months, making the central bank’s job of bringing the current 6.8 percent back down to the target one-to-three percent band more challenging.

The months ahead will prove particularly interesting for the residential real estate sector as supportive features we haven’t seen for many months begin to reassert their influence, offering upside potential to motivate previously-hesitant homeowners off the sidelines and back into the game.

Whatever the outcome, we know a backlog of serious buyers has been building for some time, making now the best time to capitalise on attractive purchasing conditions before the next cyclical upswing.

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