House prices in New Zealand are set to rise again in 2024 due to the consistent supply shortage, and rate cut forecasts.

This is according to a survey of property market analysts carried out by Reuters news agency.

The Reserve Bank of New Zealand (RBNZ) likely brought an end to a 20-month rate tightening cycle in May, which took the overnight cash rate from near zero to 5.50%. This campaign reduced the average house price in the country by 15% compared to the peak in November 2021.

This falls short of a 20% correction the majority of property analysts had forecast in May following a boom that hiked prices by over 40%. Prices have now started to increase as demand comes up against limited supply.

In 2023, New Zealand house prices were predicted to fall 4.8%, according to the Reuters survey of property market analysts undertaken earlier this month. This decline was around half of the 8.0% fall forecast in a poll carried out in May.

Additionally, average property prices were subsequently forecast to rise 5.0% and 6.0% in 2024 and 2025, respectively, up from 3.4% and 5.0% in the previous poll.

"Whether or not we're entering a new FOMO-style state in the housing market is yet to be revealed, but our money is on this not being the case, or at least, that it will not persist," said ANZ senior economist Miles Workman.

"But as we get into 2024, we think the reality of higher-for-longer interest rates will set in, and that still-stretched affordability and rising unemployment will culminate in a very subdued pace of expansion in house prices," he added.

Earlier this week, the International Monetary Fund said house prices could stabilise in 2024, yet affordability would still be a concern, despite the fall in prices as mortgage rates remained high and limited supply fuelled price pressures, Reuters reports.

Furthermore, there was no let-up for renters, with the majority of analysts surveyed saying average rents for the remainder of the year will either rise slightly or significantly. Only one analyst said average rents would fall slightly.