Home sales across New Zealand have plummeted to the lowest level in 40 years, as the sharp increase in interest rates puts the brakes on homebuyers.
The latest CoreLogic New Zealand chart pack shows that in the year to February, just 60,859 properties were sold across the country, the lowest 12-month total since October 1983.
In February itself, there were just 4100 sales, which is the lowest for that month of the year since 1981 and down 33.1 per cent from the same month last year.
CoreLogic New Zealand, Chief Property Economist Kelvin Davidson said falling property values and tight credit have begun to weigh on buyers and sellers.
“The property market remains sluggish, with sales volumes low and values falling further – by 1 per cent in February, by 1.5 per cent over the past three months, and 8.9 per cent annually,” Mr Davidson said.
“Over the past 12 months as a whole, the national sales figure (60,859) has dropped by 32.7 per cent, with the main centres a bit weaker (down 35 per cent) and the rest of NZ not quite as weak (down 29 per cent).”
Mr Davidson said it’s also been a quiet start to the year for the weekly flow of new listings, both nationally and in Auckland.
“New listings flows per week have remained low, as would-be vendors hold back from testing the waters,” he said.
“But given the similarly low level of agreed sales, the stock of listings available on the market remains high – putting pricing power in buyers’ hands.
“Of course, to be an active buyer, there are still considerable credit hurdles to be cleared first, especially raising the deposit and satisfying banks’ serviceability testing.”
He said that although new listing flows are subdued, so too are agreed sales volumes at the other end of the pipeline.
“This means that total stock on the market is broadly flat, but at higher levels than the past few years.”
First-home buyers fairing well
According to Mr Davidson, despite lower volumes, first-home buyers are still remaining active.
“Within the quiet overall market, first home buyers are holding on to a decent share of purchases, but mortgaged investors are quiet,” he said.
“First-home buyers are faring pretty well, with around 24 per cent of activity.
“But with mortgage rates still high, there may just be signs now of their limits being reached.”
Mr Davidson said one of the key factors holding back buyers has been access to credit.
“Overall mortgage flows are subdued, and it remains very difficult to get a low deposit loan, with banks holding a buffer between actual lending and the speed limit cap,” he said.
“Of all high LVR lending, though, first home buyers are currently absorbing around 80 per cent.
“Meanwhile, interest-only lending remains on a downward trend.”
The downturn may still end this year
Mr Davidson said inflation is showing signs of a peak, which may see the Reserve Bank take a more cautious approach to the speed of any further cash rate increases – especially since the economy also seems to be slowing.
“Mortgage rates may be close to (or at) a peak, but they’re still high,” he said.
“That’s tough for new borrowers and also those existing borrowers refinancing off old/low rates onto the new, higher schedule.”
Despite property prices continuing to trend downward on a monthly basis, Mr Davidson said the downturn may still end this year.
“An economic recession may now be close and the property market faces further near-term challenges – such as existing borrowers repricing onto higher mortgage rates,” he said.
“But as mortgage rates flatten, net migration rises, and some investors potentially start to return to the market, this downturn in property sales and prices could still end later this year.”