There are signs that the downturn is bottoming out for homeowners, with the latest figures from OneRoof showing value rises in three regions and the rate of decline slowing in others.
New Zealand’s average property value fell 2.3% ($22,000) to $950,000 in the three months to the end of May, as successive interest rate rises put downwards pressure on sales, according to the OneRoof Valocity House Value Index.
Northland, Otago and West Coast were bright spots in what has been a tough autumn market. All three regions enjoyed lifts in their average property value, with West Coast recording the highest quarterly value growth, at 2.9%.
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The rate of value decline has slowed or even plateaued in some regions, including Canterbury, Taranaki and Wellington, but the figures point to worsening market conditions in others.
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Over the last three months, the rate of value decline accelerated in eight regions, with Bay of Plenty, Hawke’s Bay (still reeling from the devastating impact of Cyclone Gabrielle), Marlborough, Nelson and Southland hardest hit. All five have seen their rate of decline almost double.
The figures also highlighted continued uncertainty in the country’s biggest housing market. Auckland’s average property value dropped 3.2% ($43,000) over the quarter to $1.291 million, but the rate of decline picked up in April and May, suggesting house prices in the region have still a way to go before they hit the bottom.
Of the country’s 72 territorial local authorities (TLA), just 14 saw value growth over the quarter, including Dunedin (up 1.7% to $654,000) and Queenstown (up 0.6% to $1.918m). However, the best performing TLAs over the quarter were lower-value areas with low sales volumes.
House values in all 72 TLAs are up on pre-Covid levels, but the downturn has eroded a lot of the gains homeowners enjoyed during the boom, with Wellington City’s average property value, at $983,000, only 7.1% ($66,000) above where it was in March 2020.
The latest index figures point to continued volatility in the market throughout much of winter, with the drop-off in sales and new listings and the increase in the Official Cash Rate likely to squeeze property values.
Wayne Shum, senior research analyst at Valocity, said nationwide sales volumes in the three months to the end of May were down nearly 38% year-on-year and down more than 50% on the same quarter five years ago.
OneRoof editor Owen Vaughan: "The lack of competition from investors and the news that rates have peaked suggest this is as about as good as it is going to get for first-home buyers.” Photo / Fiona Goodall
“The largest declines were in metro areas where affordability remains a barrier to entry. While first-home buyers have increased their share of the market, from 37% in April 2022 to 44% in April this year, the actual number of first-home buyer transactions has dropped 18% over the same period.
“Largely absent from the market are investors, whose number of purchases plunged 29% year-on-year.”
Shum said the Reserve Bank of New Zealand’s lifting of the OCR on May 24 to 5.5% - its 12th cash rate increase in a row - is likely to dampen demand in the short-term, but noted that the market may respond more positively to news that interest rates have reached their peak.
“A sizeable number of borrowers are set to roll onto much higher rates this year, and while that means pain for existing homeowners, the RBNZ’s forecast that last month’s cash rate rise is the last for the foreseeable future will be encouraging for new buyers.”
OneRoof editor Owen Vaughan said the drop in new listings volumes was having a draining effect on the market, with only two regions, Taranaki and Southland, recording an annual increase in May.
“Nationwide new listings in May were down 12% on the month before and down 21% year-on-year. The drop-off in new stock coming to market was steepest in Wellington, with new listings in the region down 41% year-on-year. In Auckland, the reluctance to list is hitting overall stock numbers. Total listings for the region are down nearly 4% year-on-year,” he said.
“Falling house prices and falling sales have kept vendors on the side-lines throughout autumn, and will need a turnaround in both to entice them back into the market.
“Market conditions remain positive for buyers, though, with prices now hitting the bottom, or at least very close to the bottom, especially for entry-level properties. The lack of competition from investors and the news that rates have peaked suggest this is as about as good as it is going to get for first-home buyers.”
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