The first Reserve Bank rate cut in more than four years has lifted New Zealand’s housing market out of the doldrums, with the prospect of cheaper mortgages triggering a surge in buyer interest.
Since the Official Cash Rate was cut, the number of buyer enquiries on OneRoof.co.nz jumped 49% compared to the same period last year.
Contacts in the 30 days before the cut were up just 20% on the previous year, highlighting the impact of cheaper mortgages on the market.
The Reserve Bank’s decision to bring the OCR down by 0.25 percentage points to 5.25% on August 14 has eased pressure on homeowners and buyers, after it hiked borrowing costs to their highest level since the GFC to combat rising inflation.
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The move has unleashed a flurry of interest rate cuts by the major banks, with the one-year rate expected to fall below 6% before the end of the year.
OneRoof editor Owen Vaughan said the Reserve Bank’s rate cut was the jump-start the market needed, noting the strong correlation between rising buyer interest and tumbling mortgage rates.
“Falling house prices have also played their part. There is a sense that the housing market has finally reached the floor. Buyers will want to take advantage of current conditions before prices climb.”
Analysis of enquiry numbers before and after the rate cut in the regions and major metros showed strong lifts in Marlborough (+64%); Nelson (+36%) and Bay of Plenty (+25%).
Of the major metros, the change in buyer interest was strongest in Tauranga – up 20.4% on the 18 days before the OCR announcement and up 107% year-on-year, not surprising given rents in the city are among the country’s highest.
The figures also point to growing interest in beach homes, with Waiheke Island and Thames Coromandel enjoying year-on-year spikes of 123% and 113% respectively.
Vaughan said fierce competition among the banks would see rates drop quickly, with the Reserve Bank expected to reduce the OCR further in October and November. “The economy is still fragile, but the rate cuts will likely establish a buoyant spring housing market.”
The latest figures from the OneRoof-Valocity House Value Index suggest buyers still have the upper hand – for now.
New Zealand’s average property value fell 1.7% to $956,000 in the three months to the end of August, while Auckland’s average property value dropped to its lowest point in three-and-a-half years.
In the last six months, property values in the country’s biggest housing market fell more than $50,000 to $1.278m, with the rate of decline accelerating in recent months.
Only four regions recorded quarterly value growth: Tasman (+1.6%), Otago (+1.3%), Gisborne (+1.1%) and Nelson (+0.4%). Of those, only Otago saw a high volume of sales.
The figures show the winter slump hit house prices in Northland hardest, with the region’s average property value dropping 3.9% in the three months to the end of August to $812,000. Also feeling the chill were property values in Wellington (-3.2%), Hawke’s Bay (-3%) and Auckland (-2.7%).
Canterbury property values also fell over the period, but only by 1%, with buyers in the region less affected by high interest rates.
Queenstown-Lakes was the only major metro to record value growth. Prices in the wealthy enclave continue to rise on the back of strong sales and renewed interest from Auckland and Australian buyers.
The capital’s housing market is feeling the pain of public sector job cuts, with the average property value falling 3.5% over the past three months to $983,000.
Of the 851 suburbs with 20-plus settled sales in the last 12 months, 22% recorded quarterly value growth, down from 38% in June and 58% in May.
The biggest winner in the three months to the end of August was Arrowtown, where the average property value grew 5.7% to $2.817m. Gisborne suburbs, at the other end of the price scale, also enjoyed strong value lifts.
Property values in almost one in three suburbs were down year-on-year. Alarmingly, the average property value in 11 suburbs dropped below pre-Covid levels, meaning the prolonged slump has wiped out any gains they made during the boom.
Particularly vulnerable were apartment-heavy CBD suburbs and suburbs that saw significant changes in stock and values due to infill development.
The 11 biggest slump losers are: Totara Park (-17.7%); Newmarket (-7%); Wellington Central (-5.4%); Grafton (-5%); Auckland Central (-3.4%); Mount Victoria (-3%); Manukau (-1.9%); Kelburn (-0.7%); Aro Valley (-0.5%); Point England (-0.3%); and Westgate (-0.2%).
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