As winter approaches, New Zealand's real estate market is tilting further towards buyers. In April, the national average asking price for residential properties dropped for the second consecutive month to NZ$851,746, a 3.8% decrease from the peak in February. Major cities like Auckland and Wellington have seen significant declines. The surge in housing supply is the main pressure point, with the number of houses for sale doubling to 35,924 in four years. Although inventory has decreased slightly recently, sales activity has not picked up correspondingly.
On the other hand, the labor market is facing a severe test. The unemployment rate in the first quarter of March may climb to 5.3%, reaching a new high since 2016. After the OCR was aggressively raised from 0.25% to 5.5% in 2022 to combat inflation, the economic slowdown has caused the unemployment rate to rise continuously from the cyclical low of 3.2%. Although the current OCR has dropped to 3.5% and inflation has returned to the target range of 2.5%, the lagging effect of the unemployment rate is emerging. Institutions such as Westpac Bank and ANZ Bank predict that weak employment growth will be difficult to offset population expansion, and the peak of unemployment may be extended to 2025. The growth rate of labor costs is also slowing down, and the salary increase in the private sector may drop to 2%, approaching the inflation target.
Economists point out that the RBNZ may launch a new round of interest rate cuts in May, with a cumulative cut of 75 basis points throughout the year to stimulate recovery, but the policy effect is dragged down by global trade uncertainties.
