1. Another variable year in suburbia
Our annual deep-dive into suburb-level data showed a continuation of the patchiness in the property market that’s now been in play ever since the downturn started in early 2022. For example, seven suburbs recorded double-digit gains in median values in 2024 including Blaketown and Cobden, in Grey District; Kaikoura, in Canterbury; Fernhill, in Queenstown; and Otautau, in Southland. But areas such as Mataura, in Gore, and Pipitea, in Wellington, both declined by around 10%. To be fair, you also tend to see quite a bit of variability across suburbs even in an overall market that’s booming. But the variability seen in 2024 certainly fits with the continued challenges that the property market has faced, including the weakening labour market.
2. 2025 could be the ‘year of conflicting forces’
It’s also that time again when thoughts start turning to what might lie ahead next year, and my hunch is that we’ll largely see a continuation of a market being pushed in opposite directions by a range of different forces. On the one hand, the falls in mortgage rates will tend to support house sales activity and property values, especially as existing borrowers increasingly roll off their current payments and onto the new lower rates. However, (un-)affordability is still a significant challenge, listings remain abundant, and jobs are still being lost. Debt-to-income ratio restrictions aren’t binding right now, but they are also likely to become a greater consideration in 2025. I anticipate house prices will rise in 2025, but perhaps by only 5-7%. That’s great for those who own property, but it’s still only a modest rise compared to the early stages of past upturns.
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CoreLogic chief economist Kelvin Davidson: "I anticipate house prices will rise in 2025, but perhaps by only 5-7%." Photo / Peter Meecham
The theme of trade-offs or conflicting forces may be relevant for other aspects of the property market too. For investors, for example, lower mortgage rates will make the cashflow for a typical rental purchase look more appealing. But DTIs may make it a little more difficult to get finance in the first place. Meanwhile, people choosing a mortgage rate must decide between fixing short or returning to longer terms again.
3. The economy remains lacklustre
Another reason to take a relatively cautious view about the housing market’s performance in 2025 is that the economy remains subdued, and may not kick into gear again for a while yet. The latest soggy results came from November’s electronic card spending (core retail activity up by only 0.1% from October) and the BNZ-BusinessNZ manufacturing indicator, which was in shrinking territory for the 21st month in a row.
4. Rental market still looks subdued
This week, Stats NZ will publish its rental price data for November, and there’s every chance we’ll see another subdued result. After all, net migration continues to drop – which is slowing overall property demand growth – and the stock of available rental listings has also risen; up by 17% year-on-year, and essentially the highest level for this time of year since 2020.
5. Another recession?
Finally, we’ll sign off 2024 (in terms of headline economic data) with the Q3 GDP figures from Stats NZ on Thursday. The expectation is that GDP will have fallen by perhaps 0.3-0.4%, which means another technical recession, after the drop in Q2. But as always, remember these figures for July-September are already a bit old (we’re in December), and the timelier measures suggest that Q4 probably hasn’t been as bad, albeit not great either.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
