OneRoof House Price Report - May 2023

New Zealand house prices are still well above pre-pandemic levels, even after the sharpest housing market decline since the GFC.

The latest figures from the OneRoof-Valocity House Index show the nationwide average property value is, at $958,000, 23.9% ($185,000) higher than it was in March 2020, just before Covid-19 struck.

The figures also point to a likely end to the house price slump, with the nationwide rate of decline slowing from a peak of almost 5% in September to 2% in April.

While the slowdown in the rate of decline varies from region to region, and suggests there are further value declines to come for some, much of the gains made during the boom have survived.

Even homeowners in the two regions worst affected by the slump are ahead on paper.

According to the OneRoof-Valocity figures, Auckland property values are almost 17% ($187,000) higher than in March 2020, while Wellington values are 13.6% ($105,000) higher. Both regions have seen values declines of around 20% since market peak last year.

Property values in West Coast, the only region unaffected by the downturn, are up the most on March 2020 levels. Its average property value has risen 47.7% in the last three years, from $291,000 to $430,000.

Canterbury’s average property value is up 42.4% ($225,000) over the same period to $755,000, even after a 5.4% decline since market peak.

Values in eight more regions are more than 30% higher than in March 2020, while Nelson is the only other region joining Auckland and Wellington with growth of less than 20% over the three years.

OneRoof editor Owen Vaughan said the figures illustrated the impact of both the boom and the slump on the housing market. “We have had over the short space of three years the sharpest rise and fall in Kiwi house prices in recent history,” he said.

“While property values did briefly fall after Covid-19 sent the country into a lockdown, a market collapse was averted thanks to emergency measures such as the slashing of the cash rate to 0.25% and the suspension of the LVR restrictions.

“The change in lending conditions, however, helped fuel a house-buying frenzy that resulted in a 43% jump in house prices, taking the nationwide average property from $766,000 to $1.098 million in less than two years.

“But the slump dented those gains, with an unprecedented run of interest rate hikes by the Reserve Bank, in an effort to bring down inflation, pushing nationwide average property value down 12%.”

Valocity senior researcher Wayne Shum said that the OneRoof-Valocity House Value Index figures indicated the market was stabilising, although further drops could not be ruled out. “Values are either growing or are falling at a much slower rate than they were during the worst of the slump in the second half of last year.”

Shum said that the rate of decline in Auckland had dropped from nearly 5% in September to 2.6% at the end of April, while in Wellington the brakes were on hard, with the rate of decline dropping from 10% to 2.4% over the same period.

Hamilton’s rate of decline had gone from a peak of 4.5% to 1.5%, while in Christchurch and Dunedin it was close to zero. Queenstown-Lakes was the only major metro where values are growing (up 1% in the last quarter) while Tauranga’s rate of decline was still stubbornly high at above 4%.

OneRoof editor Owen Vaughan: "Fewer new listings means more competition for quality stock." Photo / Fiona Goodall

The OneRoof-Valocity House Value Index figures showed the impact of the Covid boom and bust at a suburb level. OneRoof and Valocity looked at the value changes in 1107 suburbs with 10 or more settled sales in the last 12 months. House values in all but 13 suburbs were higher than in March 2020, with the post-pandemic gains in some reaching close to seven figures.

The research found 22 suburbs where the average property value exceeded March 2020 levels by $500,000 or more. Homeowners in the wealthy enclaves of Coatesville and Arrowtown saw the biggest jumps in the last years - $965,000 and $946,000 respectively. Most of the biggest dollar leaps were in Queenstown and on the fringes of Auckland.

The biggest losers were Wainui, in Auckland’s Rodney district, (down $219,000 on March 2020) and Wellington’s Oriental Bay (down $185,000). Totara Park, in Auckland’s Manukau, has suffered the biggest tumble since market peak, with its average property value down $905,000 in the last 12 months but still up $130,000 on pre-Covid levels.

Vaughan said that a shortage in new listings was limiting the impact of the downturn. “While total stock is up 17% year-on-year, new listings for April are down 18%. In the worst-affected regions, buyers are competing for more than a third fewer new listings than a year ago. Taranaki and Waikato are the only regions to see a lift in new stock,” he said.

“Fewer new listings means more competition for quality stock that’s been priced in line with current market expectations. Already, we’re seeing this in the auction rooms, where bidding is back to boom levels for well-finished homes.”

Shum said that the numbers showed there was still uncertainty in the market. “The post-holiday drop-off in January was more severe than in 2021 and 2022, while the expected February and March lift was significantly down on previous years, reflecting the deep challenges facing the housing market.

“The low unemployment level continues to underpin the property sector and so far there has not been an increase in mortgagee sales. There has, however, been a slight increase in the share of resales at a loss.”

Shum said that the 50 basis point lift in the official cash rate at the start of April had been a warning to banks not to lower mortgage rates, and despite the surprise drop in the annual rate of inflation to 6.7%, interest rates were likely to remain at current levels for much of the remainder 2023.

“The annual rate of inflation is still high, and it will be some time before it returns to the targeted range of between 1% and 3%. Homeowners should expect another lift in the OCR on May 24, with the Reserve Bank having already flagged a peak rate of 5.5%.”

Shum said there was still a large number of homeowners due to refix their mortgage rates this year, from 2-4% to 6%-plus.

High interest rates, at levels not seen in more than a decade, will continue to curb buyer appetites, but the recent proposal from the Reserve Bank to loosen the rules around deposits for owner-occupiers and investors could alter negative sentiment, Shum said.

“While it is true first-home buyers have increased their share of new mortgage registrations to 42.7% in March – up almost 5 percentage points year-on-year – the actual number of registrations fell 11% to just over 2400 over the same period,” he said.

“Investors’ share of purchases also lifted year-on-year, from 23% to almost 27%, but with low sales volumes it is too early to establish whether they are re-entering the market.

"The announcement from the Reserve Bank that it is looking at from June 1 easing the loan to value ratio (LVR) rules for borrowers could give buyers extra incentives to re-enter the market."