1. Property values still searching for a clear direction
The holding pattern for New Zealand’s housing market continued in November, with CoreLogic Home Value Index showing a further decline of 0.4% – yes, still a fall, but fairly minor, and certainly smaller than the average decline of 0.8% recorded from April to August. Wellington and Hamilton underperformed in November, whereas Tauranga and Christchurch were broadly flat, and Dunedin edged up by 0.4%.
In other words, the market is just ticking along, with no clear direction of travel. On one hand, mortgage rates are falling and this looks set to continue into 2025, with the Reserve Bank indicating that the Official Cash Rate will likely be cut again in February. That will clearly benefit new borrowers, and the pass-through to existing borrowers’ actual repayments will also be brisk, given that around 10% of loans are floating and another 40% are set to roll onto a new fixed rate within six months. But there are also several factors pushing in the other direction at present too, such as the overhang of available listings and the weak labour market.
All in all, the recent downturn in property values may come to an end soon, but it won’t necessarily give way to a sharp or sudden upturn. The Reserve Bank itself is projecting a rise in house prices of around 7% in 2025, and I’d broadly agree with that view. If correct, it’d be a fairly modest rise given how deep and prolonged the downturn since late 2021 has proven to be.
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2. October saw borrowers floating or fixing for 12 months
Speaking of the short-term nature of a lot of mortgages at present, last week’s data from the Reserve Bank showed more of the same – only 10% of new loans in October were fixed for longer than 12 months. Amongst the rest, only 20% were fixed for six months (down from 39% in August), with 28% floating – a high share for that type of loan – and 43% fixed for 12 months. In other words, borrowers seem to be diverging in their views; some floating presumably to try and get an even lower fixed rate later, or already choosing to fix for a bit longer at the 12-month term. Fascinating to keep an eye on in the coming months as mortgage rates themselves potentially drift lower.
CoreLogic chief economist Kelvin Davidson: "The Reserve Bank is projecting a rise in house prices of around 7% in 2025." Photo / Peter Meecham
3. Dwelling consents still look to be at a trough
There were 2850 new dwellings consented in October, which was 7% lower than the same month last year – at face value, not a great result. But it’s a much smaller decline than we’ve seen in some of the previous months, and indeed there was nothing in the data to dramatically alter the view that consents are now close to a floor. That bodes well for actual construction volumes over the coming year or so, although an outright boom doesn’t seem particularly likely with net migration falling.
4. More of the same for net migration?
On that note, Stats NZ will publish October’s migration data this Friday, and the recent trend seems likely to remain in place – arrivals falling, departures remaining strong, and the overall net migration balance dropping. That implies lower population growth and only minor growth in property demand.
5. And more of the same for economic data too?
This week’s macro releases may not be particularly encouraging either, with Stats NZ’s electronic card spending figures for November due Thursday and the BNZ-BusinessNZ Performance of Manufacturing Index out on Friday. There’s a lot more data to arrive before the Reserve Bank’s next cash rate call in February, but further sluggishness for card spending and manufacturing over the past month would reinforce the idea that another 0.5% cut could be delivered at that meeting.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
