New Zealand’s average property value has fallen below $1 million, new OneRoof figures show.
The nationwide average property value dropped 3.4% ($35,000) in the last quarter of 2022 to $990,000, as the real estate slump continued to take its toll on house prices across much of the country.
Figures from the latest OneRoof Valocity House Value Index show quarterly declines in all but two of New Zealand's 16 regions, with significant weaknesses apparent in Greater Wellington and Auckland.
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Only West Coast and Southland, two of the country's cheapest housing markets, managed to end the year on a positive note, with the former's average property value up 3.2% ($13,000) to $420,000 and the latter's rising 2.1% ($11,000) to $525,000.
Suffering the country's biggest housing market hangover is Greater Wellington, with the region's average property value tumbling 6.7% ($65,000) over the quarter to $903,000. Year on year, the value decline was 18.9% ($210,000), highlighting the extent of the negative equity risk for those who bought at market peak in the region.
The figures show Auckland’s average property value dropped 4.1% ($58,000) over the three months to the end of December to $1.369m - its ninth consecutive decline since the end of March. For first home buyers, the switch in market conditions means house prices in the country's biggest housing market are now $186,000 lower than they were a year ago.
James Wilson, head of valuations at OneRoof's data partner Valocity, said the combined weight of successive interest rate hikes, rising inflation and a crackdown on home loans had reined in buyer spending and put an end to the post-Covid era of rampant price growth. And a strong warning from the Reserve Bank of New Zealand that the country will enter a recession in 2023 meant further steep value declines were on the cards.
"Since hitting a high of almost $1.1m in February, New Zealand's average property value has fallen 9.8% - that's more than $100,000 of value gains wiped out within the space of eight months. Some of Greater Wellington’s newest homeowners are looking particularly vulnerable, with the figures showing a 20% fall from market peak in the region - a loss of $238,818," he said.
"More worrying is the fact that the average property value in 16 of Greater Wellington's suburbs is now lower than it was two years ago, meaning the slump has claimed nearly all of the value gains the suburbs made during the boom."
Wilson said the worst affected suburbs were Oriental Bay, dropping $225,000 in the last 24 months, Roseneath (down $129,000), Mount Victoria (down $74,000) and Wadestown (down $59,000). He put their dramatic change in fortunes down to low sales volumes, a drop-off in first home buyer demand and a retreat by investors. "Three apartment heavy Auckland suburbs - Auckland Central, Newmarket and Grafton - are in the same boat, although all three saw minimum growth during the boom."
Wilson warned: "Those who bought in these 'high-risk' suburbs in the last two years with a minimum deposit are likely to find themselves in negative equity, and run the risk of incurring real losses if forced to sell in the current market environment."
Of the country's seven major metros, only one, Queenstown, kept its head above water, with its average property value growing 10.2% ($175,000) in the last 12 months to $1.884m. A slower end to 2022 - quarterly growth was a marginal 0.7% - suggests house prices in the rich-lister town will be on the slide in the quarter of 2023.
In Christchurch, the average property value dropped just 2.9% ($22,000) year on year to $749,000, with a buoyant first half of the year, driven by solid demand from first home buyers, helping the city dodge the steeper declines that beset Dunedin (down 8.4% year on year), Hamilton (-8.5%) and Tauranga (-7.1%). The capital's average property value is down almost 20% ($252,000) over the same period, and is likely to drop below the $1m mark before the end of summer.
Valocity head of valuations James Wilson: "Some of Greater Wellington’s newest homeowners are looking particularly vulnerable." Photo / Fiona Goodall
Wayne Shum, head of research at Valocity, said that there was little change in the share of new mortgage registrations by first home buyers in the last quarter of the year compared to the same period in 2021 (40.4% in 2021, and 40.2% in 2022). However, the overall volume had fallen sharply, from 10,200 to 6900.
Shum said: "It is unlikely sales and mortgage registration volumes will return to 2021 levels in the near future, with first home buyers likely to be deterred by rising interest rates. The outlook for property investors and owner-occupiers is just as bleak, with higher repayments and lack of rental and capital growth likely to keep investors on the sidelines for much of the year, while higher mortgage rates and cost of living squeeze will continue to curb owners' moving plans and budgets."
Shum added: "Spring failed to provide the uplift many hoped for, with rising mortgage rates and cost of living continuing to plague market participants. Going into summer, potential buyers and sellers will take a wait and see approach."
