Housing market reaches turning point


Kiwis feel optimistic hoping for a turnaround in the market (INL Image)

Praneeta Mahajan
Hamilton, June 29, 2023

In the first meaningful positive shift in house price expectations since mid-2021, ASB’s Housing Confidence data shows that more New Zealanders agree we are edging closer to the turning point for the housing market, with the nation now roughly split 50/50 on whether it is a good time to buy.

Released quarterly, this report provides a comprehensive summary of housing sentiment among ordinary Kiwis across the country.

ASB Survey findings

ASB’s latest Housing Confidence survey for the three months to April showed that 34 % of respondents expected house prices to continue to fall over the next 12 months, compared with 43% in the prior quarter.

In a statement, ASB Economist Nathaniel Keall said confidence increased but remained very low, with Aucklanders the most confident – a net 6% agreeing on it was a good time to buy property.

“It seems the housing market is moving into more lukewarm territory, but we are still a long way off the red-hot days of 2020 and 2021,” Mr Keall said.

The survey indicated the majority of New Zealanders (net 66%) were not convinced the property market had found its floor, but an increased number thought it was close.

A growing number also expected home loan rates to be near their peak, though more than half (net 59 %) still expected further interest rate rises.

“It remains a tricky environment to predict what is next for interest rates and house prices, and this uncertainty comes as many New Zealanders are doing it tough in terms of managing their mortgage repayments and housing affordability,” Mr Keall said.

ASB Housing confidence survey released this month (Source: ASB/ Camorra)

Other key factors for next quarter

“This quarter’s result does not capture the dramatic shift in migration figures, the 2023 Budget or the RBNZ’s [Reserve Bank of New Zealand] last monetary policy statement, which will all be key watch-outs for the next quarter.

“We do not expect any further OCR [official cash rate] hikes from here, suggesting mortgage rates are at or around their peak. But we do agree it is sensible to be budgeting on rates remaining at these levels for some time to come, with OCR cuts unlikely before mid-2024.”

A shift in price expectations was reported throughout the country but was more pronounced in the South Island, where house prices may have already turned, as indicated by recent Real Estate Institute data.

Sales on the rise

There are growing signs the housing market is beginning to improve with sales numbers on the rise.

The Real Estate Institute (REINZ) House Price Index (HPI) for New Zealand, which measured the changing value of residential property nationwide, showed an annual decrease of 11% in May, or down 10% when Auckland was excluded. While some regions saw an increase in sales others remained subdued.

“We are seeing glimpses of positivity, especially in the regions following the Reserve Bank’s announcement of easing loan-to-value restrictions and stabilising interest rates,” REINZ chief executive Jen Baird said.

“It is clear that current high interest rates combined with a tight economy, are still influencing the market as buyers continue to act with caution while economic headwinds play out.”

At the end of May, the total number of properties for sale across New Zealand was 26,685, up 250 properties (0.9%) year-on-year, and down 6.8% month-on-month.

New Zealand, excluding Auckland, was also up from 15,799 to 17,015, an increase of 1,216 properties annually (+7.7%). Month-on-month, inventory decreased by 7.3%.

Stabilised Inventory

“Inventory levels look to have stabilised with only a slight increase in stock levels. We have seen low levels of property coming to market across the country for much of this year and, as sales volumes are back at more normal levels, we may be seeing the beginning of a shift in the balance of supply vs demand,” says Ms Baird.

The total number of properties sold across New Zealand in May 2023 was 5,752, down from 5,776 in May 2022 (-0.4%), and up 30.0% month on month. In New Zealand, excluding Auckland, sales counts increased by 1.4% year-on-year and 26.7% month-on-month.

Seven regions, Northland, Auckland, Waikato, Wellington, Tasman, Marlborough and Southland all had a 30% increase or more in sales volumes month-on-month, with Marlborough topping the list with 66.7% in sales.

“Northland and Waikato had a slightly larger increase in sales count from last month than is typical whereas the Auckland and Southland month-on-month movements in sales count were less than what typically happens in those regions when moving from April to May,” commented Ms Baird.

“We have also heard from salespeople that most sellers are meeting the market while others are potentially holding tight on selling at a higher sale price, particularly if they had bought at the market’s peak. These tend to be the properties that stay on the market longer. Easing of loan-to-value restrictions, commentary around peak inflation and a renewed confidence in seeing more first home buyers seek out opportunities,” states Baird.

Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.

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