2023 Review & 2024 Prediction (1/2)
2023 was finished, and the property market saw massive changes during this year. I predicted the 10 most important events in 2023 last year. Let’s review it and see what happened:
- Interest rates: RBNZ will increase OCR another 0.5~1% in the next 6 months. Then potentially 1 year fixed rate which is early 7% now reaches to 8% or higher, other rates follow the same. The rates will remain in the same range till the end of the year. The update is rate was between 7% ~ 8% throughout the year.
- Access to money: It is clear increasing interest rates will impact borrowers’ servicing and significantly will reduce the borrowing power. The update is borrowing was limited due to the serviceability of borrowers in 2023
- Recession, inflation: Considering planned RBNZ economy slowdown, inflation, and higher interest rates will result in more companies including construction properties bankrupted. I highly recommend buying properties almost finish and ready for CCC and title. The update is New Zealand experienced mild recession and big construction companies like ELE group collapsed.
- Election: It is usual property market and economy to slow down (or hold) a couple of months before the election in October 2023. The update is market started recovering even before the election as buyers prediction was price would increase after the national party took government.
- Rent: Considering borders are open more tourists, work & student visa holders are coming to New Zealand and need homes for rent, recent flood damaged a significant number of properties and their occupants need to rent and finally inflation, interest rate tax deductibility & higher interest rate will push rent significantly higher. The update is rent is significantly on the rise in 2023.
- New build properties: In this post, I explained why new build property prices will increase. The update is a construction cost and accordingly new build property price raised in 2023.
- Property price: There is a clear link between interest rates and house price growth. When interest rates are high, It is harder to get a mortgage and more expensive to pay back, so the demand for property decreases. While the property market has already dropped significantly (Wellington 20.2% and Auckland 18%), the prediction is that values will continue to decline in 2023. The update is first half of 2023 price declined but from July 2023 price started increasing.
- Labour market and unemployment: Considering more temporary work visa holders coming to New Zealand and business costs increasing, the labour market will change and more employees will be available than required and wage increases will slow down. The update is the labour market is slowing down and some companies start restructuring at the end of 2023.
- RMA change: And finally RMA changes will come into effect on August 2023 impacting land prices and some areas. The update is due election and the national party plan RMA reform will be reviewed.
I want to highlight again if you have the knowledge, plan, strategy and get help from A team (coach, accountant, broker, lawyer, agent, property manager, builder, planner, … ) whatever happens in the market you will make money out of it. If you have any questions about how these impact the property market contact me and don’t miss my next post which would be predictions in 2024.