1. Another modest home value decline sums up 2024
The latest figures from CoreLogic's Home Value Index show the nationwide median property value fell a modest 0.2% in December. It's the ninth monthly value drop since March (October's flat result was the outlier) and is really just a continuation of the broader trend we’ve seen throughout most of the year – gentle declines in property values, initially reflecting high mortgage rates, but more recently a weak labour market. In other words, December’s soggy result nicely summed up 2024 as a whole.
However, there are signs that lower mortgage rates are starting to work through the system and that the overall value decline could be nearing its end. For example, Hamilton's median property value rose by 1.0%, Tauranga was up by 0.4%, Dunedin by 0.3%, and Christchurch held steady (having also recorded some modest gains in prior months). Some of the smaller centres also recorded modest property value growth in December, including rises of 0.2% apiece in Whangarei, Napier, and Palmerston North.
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2. But Auckland and Wellington are still weak
That said, two of New Zealand's largest housing markets have yet to see much light at the end of the tunnel. Auckland's median property value dropped 0.4% in December, while the capital's median property value fell 0.8%. Property values in these markets remain 20-25% below their post-Covid peak (in contrast, values in Christchurch are only 7% below their peak).
Auckland values seem to be weighed down by the high number of properties for sale in the city (both existing properties and completed new-builds). In Wellington, stock levels are also a headwind, but the region is also reeling from public sector cuts, not only in terms of the direct job losses but also the negative spillover effect on economic and housing market confidence levels.
CoreLogic chief economist Kelvin Davidson: "There are signs that lower mortgage rates are starting to work through the system and that the overall value decline could be nearing its end." Photo / Peter Meecham
3. Borrowers are currently playing a short game
Over the holiday period, the Reserve Bank published November’s mortgage data, and it showed $7.4 billion of activity - an annual rise of $900 million and a continuation of the recent upward trend. Low-deposit lending remains controlled, as does high debt-to-income ratio lending (at least for now). But perhaps most interestingly, the share of existing mortgages on floating rates has risen sharply from only 11% in October to 14% in November – the highest share since mid-2020. Clearly, people are still banking on lower fixed mortgage rates in future and want to be able to lock them in immediately when they think the time is right. On the flipside, less than 20% of existing loans are fixed for remaining terms longer than 12 months.
4. Watching investors closely this year
Later this week, the CoreLogic Buyer Classification data for December will be available. One aspect I’ll be watching closely (and I suspect over the rest of the year too) will be trends for mortgaged investors, who have already shown signs of a comeback in recent months.
5. A year of conflicting forces?
And finally for this week, just to reiterate my very high-level outlook for the market in 2025 – potential conflicting forces (e.g. lower mortgage rates but a weak labour market) which leave property values rising by only around 5% for the year.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
