House prices and house sale are dropping, properties are sitting on the market for longer, and buyers are either too stretched or too picky to close a deal.
The last time Auckland sellers experienced these kind of conditions was three years ago, when the market was in the midst of a slump that really didn’t end until the start of 2020.
New figures released by the Real Estate Institute of New Zealand lay bare the weaknesses and challenges in the market.
Auckland’s median sale price for February was $1.19m, down 0.8% on January and the third consecutive drop since November 2021, when the median was a record $1.3m.
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House sales in the city have also taken a tumble. Just 1741 sales were completed in February, up 30% on January’s total but down 40% on February’s total last year. It’s also the city’s worst February for sale since 2019.
Nationwide, the number of sales for February was 5597 – down 32% on February last year – while the median sale price was $885,000, marginally up January’s figure but down 2% on December’s median and down 4% on November’s high of $925,000.
REINZ chief executive Jen Baird said that outside of Auckland the sales count last month was down to 2011 levels.
“New listings were up 7.5% in February, so total inventory is way up on last year. This February it’s 23,270 nationally,” she said.
“You generally expect a lot more listings coming to market in February, but it’s too soon to make a call about what will happen heading into winter.”
REINZ chief executive Jen Baird said there were too many moving pieces to make a call on the market’s future direction. Photo / Fiona Goodall
Rising inflation and rising interest rates made it difficult to see where the housing market would land. Countering that is the Government’s newly announced U-turn on the CCCFA, a piece of legislation which has been blamed for hampering first home buyers’ ability to get a mortgage.
“There are too many moving pieces to say,” she said.
Kiwibank senior economist Jeremy Couchman said the difference between 2019 and now is that the sales volume drop is across all of New Zealand, not just in Auckland.
“We’re facing significant headwinds from tightening credit and rising mortgage rates. Last week's changes to CCCFA might take a few months as banks adjust their processes again, so we won’t see that help until May or June.
“But the biggest force will be interest rates and mortgage rates. Our biggest risk is inflation rates will move quickly through 2022, and the Reserve Bank may be forced to lift interest rates to slow inflation.”
Kiwibank is not expecting recovery until well into 2023 and has lowered its house price outlook to a decline of 3% in the last quarter of this year, and a cumulative 5% decline by the start of 2023.
Couchman added that the rest of this year is about a “recovery from the shock of the last two years”.
Bayleys head of insights, Chris Farhi, said that the trajectory of interest rates would have the biggest bearing on the market.
“Back in 2019, the discussion was around how the Reserve Bank could get more inflation back into the market. Now we’ve got a surge, so that’s hard for people short term, until wage inflation catches up,” he said.
Ray White COO Daniel Coulson: “It’s just much more difficult to purchase today than last year. It’s just harder to get access to funds.” Photo / Supplied
He added: “Immigration is the wild card, this year, to see how the border openings impact property – first with the rental market, and then the property market.”
One thing from 2019 that maybe worth revisiting is the slower pace of house price growth back then. “We’ve become desensitised to the big changes. Back then increases of 3% people were going ‘wow’. To get back to lower levels of growth will be a good thing, rather than the extremes.”
CoreLogic’s chief property economist, Kelvin Davidson, said that the last two years had given economists and property analysts some valuable lessons on how the market works.
“Credit availability and cost matter more for the market over shorter horizons than other ‘fundamentals’ like population growth or housing stock changes,” he said.
“Without net migration in the past year or two, and with new housing supply also strong, property values have still soared. Why? We’ve had low interest rates and mortgages have been relatively easy to get, especially while the LVR limits were temporarily removed from April 2020 to March 2021.”
Ray White chief operating officer Daniel Coulson said that the big lesson of the last two years was not to make predictions.
He said that for Auckland the key difference between February 2019 and now was that in 2019 “we were in a period of relative calm”.
“The last market peak was in 2015 and was not as frenzied in terms of price growth. What we’re seeing now – and I know we’ve used this word a lot in the past two years – is unprecedented.
“It’s just much more difficult to purchase today than last year. It’s just harder to get access to funds.”
He said that while current interest rates are roughly the same as those in 2019, affordability is not – the national median price three years ago was $560,000, not today’s $885,000.
