1. Not many areas are escaping the value downturn
Last week CoreLogic published its latest house price figures, and it made for sobering reading (if you’re a property owner, that is). In a nutshell, the recent downturn in the housing market is evident right across the country, with around 70% of suburbs analysed – that’s about 670 out of 950 – seeing their median property value fall in the three months to September. Around 175 of those fallers were down by more than 2%.
Auckland suburbs saw some of the steepest falls, with East Tamaki, Northpark and Somerville all suffering value drops of more than 6%. The downwards pressure in the city’s market continues to be driven by affordability concerns and buyer caution.
The top-ranking suburbs for value growth were generally at the more affordable end of the spectrum, with five of the biggest risers sporting a median property value of less than $500,000. Cobden, in Grey, enjoyed the biggest lift. Its median property value rose 22.6% to $313,000 over the quarter. Blaketown, also in Grey district, was 15.9% to $333,750 over the same period.
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Clearly, lower mortgage rates will support house prices in the medium-term, but it will take a bit of time for the positive effects of cheaper credit to work its way through the system. And on the flipside, there are plenty of headwinds too, such as still-stretched housing affordability, abundant listings, and of course the weakening labour market.
2. Good news for tenants, not so good for landlords
Turning to net migration, July’s figure itself (5310) was a relatively strong result, but it wasn’t enough to stop the 12-month rolling total from falling further; it’s now down to around 67,200 – still high, but slowing quickly. This is easing the overall population growth rate and dampening physical property demand, especially for rental stock. Unsurprisingly, then, Stats NZ also reported last week that rents only rose by 1.4% in the year to August, the slowest rate since 0.8% in December 2022. Wellington (region) was only up by 0.4%, while Auckland dropped by 0.3%. Great news for tenants, albeit less welcome for landlords.
3. At least inflation continues to slow
On a related note, that rent data was part of a wider selected price indexes release from Stats NZ, covering around 45% of the benchmark CPI (quarterly). This partial inflation indicator was up by only around 1% from a year earlier, which is the lowest for several years, with the trend helped by lower fuel prices and airfares in August. That adds to the already strong case for another cut to the Official Cash Rate on October 9 – a bright spot in a sea of relative gloom lately.
CoreLogic chief economist Kelvin Davidson: "The OCR and mortgage rates are likely to continue to fall." Photo / Peter Meecham
4. No upturn for the economy just yet
The other side of that same OCR coin is the continued weakness of the economy. Recent data covering timely indicators such as manufacturing activity and retail spending on electronic cards has remained lacklustre, and we’ll get more information this week too. For example, the NZ Activity Index will be out on Tuesday, and is likely to indicate that wider economic performance remained pretty sluggish in August (after a weak June and slight rebound in July). Yet more evidence that the OCR and mortgage rates are likely to continue to fall.
5. GDP will get plenty of coverage, but it’s ‘old news’
Then on Thursday, Stats NZ will publish the official GDP stats for Q2 – set to show a quarterly fall of perhaps 0.5% (at most). That will get a lot of coverage, but ultimately we should probably move on pretty quickly. After all, these figures are already quite old (relating to April-June), and the Reserve Bank is already anticipating a drop anyway – so the latest figures are unlikely to change the general economic mood or expectations very much, if at all.
- Kelvin Davidson is chief economist at property insights firm CoreLogic
