ANALYSIS: House prices jumped 1.4% in February. That’s a decent leap, and the fastest monthly increase since November 2021 – the peak of the Covid-19 house price boom.
February’s increase also follows a 0.5% drop in December and a 0.3% drop in January.
But before you rush off to list your property or buy another, thinking that the boom times are back, you’ve got to ask yourself: Is this a genuine market recovery or just a seasonal blip?
Property prices tend to follow a familiar pattern across the year. House prices usually go down (or sideways) in December and January. No one’s buying, no one’s selling. We’re all on holiday for Christmas and New Year’s, so the lack of buyers means property prices are often a wee bit softer in the first and last months of the year.
Start your property search
Because property prices fall over those two months, February’s more normal market looks like a large bounce back in percentage terms.
Which means this February’s 1.4% increase is in line with the market and isn’t necessarily a sign that property prices are about to skyrocket.
For instance, house prices increased by 1% in February last year. But, the month after, they fell for the next 5 months. If you took the strong February number as a sign the market was improving, you might have made the wrong property decision.
Discover more:
- Ed McKnight: The dark side of having a big mortgage
- NZ's most expensive and cheapest streets revealed
- $1m gains: The big home-price winners since Covid-19
But how do you tell whether property price movements are just seasonal variations or genuine market movements? Well, you need to care less about how much house prices changed and care more about whether the change was larger than expected. In other words, you need to seasonally adjust the data. This takes out the usual ups and downs of the year and shows whether the underlying market is improving (or not).
So, what’s actually happening? The graph below shows the month-by-month changes in house prices – both actual and the seasonally adjusted.
For example, in January, house prices fell by 0.3%. But that wasn’t a big fall for January. It was smaller than what you’d usually expect. So, seasonally adjusted house prices went up 0.1% that month.
Compare that to February 2025. Actual house prices went up 1.4%. However, once you take out the seasonal effect, they only went up by 0.3%. The market is improving, but perhaps not by as much as that big headline figure suggests.
Opes Partners economist Ed McKnight: "The trouble with house price data is that property prices move around a lot throughout the year." Photo / Fiona Goodall
Taking out these seasonal variations might take the wind out of your sails. Since prices didn’t go up that much in February. However, it also shows that the property price decreases in December and January weren’t anything to be too concerned about either. They were also just seasonal variations.
In fact, seasonally adjusted house prices increased in five out of the last six months. So, it seems quite clear that the mini-property price downturn that happened in mid-2024 is over.
Seasonally adjusted prices are up 2.6% over the last 6 months. So, it’s not out of the question that prices might rise 5% throughout the 2025 calendar year.
The trouble with house price data is that property prices move around a lot throughout the year. So, it’s hard to spot the underlying trends. But taking out those seasonal effects means you’re more likely to spot a genuine trend rather than a one-off blip.
- Ed McKnight is the economist at property investment company Opes Partners
