Praneeta Mahajan
Hamilton, August 3, 2023
A recent report by CoreLogic brought some signs of respite for the housing market as the Real estate industry prepares for a busy spring season starting next month.
Wellington house prices have jumped for the first time in 17 months while Auckland values are stabilising, all but confirming the housing market’s slump is ending just ahead of spring, which is revered as the traditional selling season across regions.
That is according to property analysts CoreLogic, whose latest House Price Index showed Wellington prices crept up by 0.3% in July compared to a month earlier.
The downturn in the final stages
The fall in national property values continued to moderate in July, and with the latest data showing increases in some parts of the country, it all but confirms that the downturn is in its final stages.
CoreLogic’s House Price Index (HPI) dropped by 0.4% in July, with the three-month change at -2.3%, taking the annual decline to 10.1%. The 0.4% national fall in July was the smallest decline since the 0.3% fall in January, and a significant deceleration from June’s 1.2% fall.
CoreLogic New Zealand Chief Property Economist, Kelvin Davidson said there were signs in key regions of prices stabilising or in some cases even growing. Indeed, values in five of the seven main sub-markets in Auckland were either flat or higher in July, with most of the other main centres down a marginal 0.2% or 0.3% in the month.
“July’s drop in prices at the national level may seem surprising, given the recent commentary about an emerging turnaround for the housing market. But it is important to note that the latest decline is the smallest in six months, and also that some regional markets saw values rise, most notably in Wellington,” he said.
Factors that helped
“Market indicators started looking stronger in June and that positive momentum has continued in July. Several key factors are pointing to the trough for house prices, including a broad peak for mortgage rates, albeit some further tweaks by the banks cannot be ruled out, an easing in the CCCFA and LVR rules, still-high employment, and solid net migration flows. The easing in LVR policy has already helped more low-deposit investors into the market, such as those with 35-40% deposits who were previously locked out.
“We have also seen a pick-up in the volume of sales, stock on the market is dropping, and this is likely starting to result in the re-emergence of competitive price pressures.”
Mr Davidson said the shifting national fundamentals appeared to be mirrored across most of the main centres, with Hamilton, Tauranga, Christchurch and Dunedin each recording a fairly modest drop in average property values in July, of either 0.3% or 0.2%.
Auckland’s drop was more significant at 0.6%, but that weakness was not universal for the super-city as a whole, instead occurring in only one or two of its sub-markets.
“It is early days for the Wellington market, but the fact that values previously dropped so significantly last year suggested that it could be among the first areas to bounce back and lead any recovery too. That dynamic might have just started to play out in July’s result,” Mr Davidson said.
Property Market Outlook
Mr Davidson said a range of metrics and indicators made it increasingly clear that the trough for New Zealand’s house prices has essentially arrived, with further evidence across all index measures likely to emerge in the next couple of months.
“There will be mixed views about this point we are at in the cycle. Existing property owners will no doubt be pleased but there are always two sides to the coin in the housing market, and aspiring buyers would clearly prefer to see further declines,” he said.
“Reaching a trough in the downturn does not mean there is likely to be a sudden snapback to widespread and strong gains in house prices and it will be unsurprising if some areas record further falls in the coming months, while others stabilise or see mild increases. Generally speaking, the ‘next phase’ of the cycle could still be relatively muted, given that affordability remains stretched, mortgage rates are not set to drop anytime soon, and also in light of the prospect of caps on debt-to-income ratios for mortgages early in 2024.”
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.
