A new year offers fresh opportunities for Aucklanders in the residential marketplace, but what will drive residential decision-making for the year ahead?

There’s an air of positivity circulating across the residential marketplace as buyers and sellers are encouraged by a welcome mix of government policy clarity, rising inventory levels, and inflation that appears to be tracking in the right direction.

RAYMOND MOUNTFORT, GENERAL MANAGER AUCKLAND RESIDENTIAL

In 2024, we find ourselves looking ahead with optimism, but we aren’t out of the woods yet.

Although prices are rising across the region, it is not at an accelerating pace, and affordability issues continue to be a critical barrier for many buyers keenly watching the residential sales market for opportunities.

Despite this, confidence has improved markedly, something we are seeing reflected in rising inventory levels as more sellers see now as the right time to make their move. Booming population growth, falling construction activity and the prospect of mortgage rate cuts later in the year are expected to deliver a reasonable upswing, prompting buyers to proactively position themselves for the months ahead.

Latest figures from the Reserve Bank of New Zealand (RBNZ) show the number of mortgage holders fixing for shorter terms has increased, which is an indication that, broadly, Kiwis expect lending rates to shift lower sooner.

This is supported by recent Consumer Price Index (CPI) inflation data, which is on a clear downward path from its peak in quarter three of 2021.

Nonetheless, the potential for value growth may encounter obstacles, as we find in data from Statistics New Zealand. In the third quarter of 2023, CPI inflation slowed to 4.7 percent. However, in the same period, household living costs rose by seven percent. The disparity is also higher than the corresponding growth in disposable income Kiwi households noted in 2023 and serves as a reminder of the affordability challenges impacting the market.

In spite of this, Bayleys branches across the Auckland region have recorded a flurry of new listings, and we are encouraged by an increase in the engagement we’re seeing through increased website traffic and buyer enquiries.

We are confident that the traditionally busy months of March and April will attract a heightened level of attention, particularly as we gain more clarity around government policy stance on housing and development.

SUZIE WIGGLESWORTH, NATIONAL DIRECTOR PROJECTS

Auckland is currently building far too few homes to support record population growth. But, while new building consent numbers have continued to fall, the economic drivers to support development are steadily improving.

Following a challenging few years, where construction costs, labour shortages and feasibility issues impacted developers’ ability to bring new projects to the market, home builders are more optimistic about the future.

We’ve seen the fastest-ever increase in the size of the construction workforce, with an additional 41,000 employees joining the sector over the past year. At the same time, plummeting construction costs are helping to offset higher interest rates, and supportive government policy is expected to encourage greater residential sector investment from private development firms.

Generally speaking, building consents tend to lead construction by up to six months, and we are still looking for a floor in new issuance numbers. The pipeline of new projects coming online will remain restricted for the next few years, leading to an increase in competition from buyers for a finite supply of new homes and apartments.

The government’s pledge to quash Medium Density Residential Standards (MDRS) will limit development in and around existing suburbs. While recent land use changes continue to facilitate greater density in more places, the time, design and funding required to bring large-scale complexes to market remains tricky.

At Bayleys we are fortunate to work with a number of skilled developers across the region. While pre-sales still lag the momentum of the last housing market boom, it has been interesting to note an increase in activity from empty nesters purchasing premium homes and apartments in some of our most desirable areas – think the eastern shoreline and city harbour suburbs.

Young families continue to find value in new housing subdivisions on Auckland’s outer fringes, particularly given the shift to more agile working environments and the capability to work from home at least one or two days during the week. These trends will continue throughout the year, and we are watching development in the Build-to-Rent sector with interest.

CONOR PATTON, NATIONAL AUCTION MANAGER

Auctions are rising in prominence as the preferred marketing strategy for many sellers in 2024. Following an uncertain 2023, we have seen double-digit growth in the number of sellers choosing to list their homes for sale by auction, reflecting a better understanding of the process's benefits and sellers' preference for transparency.

The latest data from property portal realestate.co.nz shows that nationally, buyer searches increase 21 percent year-on-year in December 2023 and 14 percent year-on-year in January 2024. At the same time, engagements increased by 25 percent in December and 22 percent in January.

With more market information available than ever before, our sellers are tuned into these dynamics, increasingly seeking to leverage more eyes on listings to effect a sale in the most timely and efficient manner.

Discussions with buyers and sellers across the country have shown those in the market are also encouraged by potential policy changes and expected clarity during the months ahead.

Recently, the Commerce Minister announced a further easing of the overly prescriptive Credit Contracts and Consumer Finance Act (CCCFA) rules that is expected to encourage an increase in the number of mortgage approvals, allowing more Kiwis access to finance to purchase their homes.

Also on our radar is the RBNZ’s proposal to introduce Debt-to-Income (DTI) limits, which could see lending restricted to a multiple of six times (or seven for investors) income. While broadly, this is not expected to effect change, anecdotal evidence suggests some buyers may bring purchasing decisions forward to get ahead of the legislation.

Investors are particularly conspicuous in their absence, preferring to watch what happens over the next few months. Reinstating interest deductibility and rolling back the Bright-line Test from 10 to two years, with a suite of tenancy changes and the introduction of the Residential Property Managers Bill, could be a buoy for the sector, and our auction rooms will be a key battleground should they emerge from what feels like a very long hiatus.