Number of property transfers

IBISWorld forecasts that the number of property transfers will drop by 26.7% in 2024-25 to 107,761 transfers. This massive decline comes from a steep drop in dwelling consents issued in 2023-24, whereby the effects are delayed and projected to be felt in the following year – stemming from the lag between the issuance of building consents and the completion of properties. Furthermore, residential housing prices are also projected to climb precipitously in 2024-25 and outpace growth in mortgage affordability, netting to contribute to the downturn in the number of property transfers as fewer people would be able to afford houses. Effective July 2024, the Reserve Bank of New Zealand made regulatory changes to their debt-to-income rules that exempt construction loans from DTI restrictions. Whilst this encourages more initial construction activity, it also adds complexity to borrowing and makes it harder – particularly for buyers with higher debt levels relative to their income – to buy existing homes. The net effect is a drop in the number of property transfers.

Over the past five years, New Zealand's property market has experienced significant fluctuations driven by changes in monetary policy and economic factors. In 2020-21, the Reserve Bank of New Zealand (RBNZ) reduced the cash rate to an unprecedented low of 0.25%. This action made borrowing more affordable and mortgages more accessible, sparking strong demand for housing. Property transfers increased notably as first-time buyers and investors entered the market, attracted by low interest rates and the prospect of capital gains. The market's momentum resulted in a high number of building consents issued during this period, indicating confidence in the residential construction sector.

The landscape shifted in recent years. By 2023-24, the RBNZ had raised the cash rate to over 5% in response to inflationary pressures and economic considerations. This increase has led to higher borrowing costs and reduced mortgage affordability, causing a slowdown in property market activity. Potential buyers have faced higher interest expenses, while sellers have encountered decreased demand. Additionally, escalating construction costs placed further strain on the market, discouraging new developments and contributing to a decline in property transactions. IBISWorld forecasts the number of property transfers to decrease at a compound annual rate of 9.9% over the five years leading up to 2024-25. This projection underscores the significant impact that elevated interest rates and construction costs are having on the real estate sector in New Zealand.