Property prices in New Zealand ticked higher last month, adding to the recent string of increases, which suggests the market has turned the corner.
According to CoreLogic NZ, home values rose 0.7 per cent in November, following October’s 0.4 per cent increase.
Property prices are now up 1.1 per cent over the past three months and are only down 4.5 per cent on an annual basis.
Values ended up falling 13.2 per cent from their peak, before starting their recovery in September – to remain down 12.3 per cent from their highs.
CoreLogic NZ Chief Property Economist, Kelvin Davidson said that around the main centres, signs of the emerging upturn were widespread in November.
He said Auckland, Hamilton, Tauranga, Wellington, and Christchurch all had monthly rises in the range of 0.7 per cent to 0.9 per cent, while Dunedin rose by a buoyant 1.9 per cent.
“It’s no real surprise to see the second monthly rise in house prices for this emerging cycle, given that mortgage rates have shown clearer signs of peaking in recent weeks,” Mr Davidson said.
“Despite some elevated volatility in global financial markets, the labour market is still relatively robust, and net migration inflows remain very high.
“However, the market hasn’t exactly soared away just yet.”
Mr Davison said while sales volumes had grown steadily in percentage terms, it’s from a low base so that hadn’t translated into a surge in the number of deals.
“With the flow of new listings ticking along, we’re seeing a flattening and perhaps even a slight lift, in properties on the market in recent weeks,” he said.
“That may take a little heat out of prices as buyers benefit from more choice and vendors contend with a subtle rise in competition.”
He also said credit conditions remained challenging for homebuyers.
“Even if mortgage rates don’t rise much further, or even dip a bit for the longer-term fixed rates, they’re still high – and serviceability testing remains a significant hurdle too,” Mr Davidson said.
“Loan-to-value ratio rules are quite a restraint on low-deposit lending as well, although first home buyers are certainly taking advantage of that speed limit where they can.”
Mr Davidson said the growth in property values in Auckland in November was fairly consistent across the sub-markets, with the North Shore up by a robust 1.8 per cent, but Rodney, Auckland City, and Waitakere in the more measured range of 0.7 per cent to 0.8 per cent.
“This month’s results serve as a further reminder that this upturn may not be all one-way traffic,” he said.
“The patchiness in property values by sub-region, even though wider market averages have started to turn around, could well remain a feature in the coming months, in Auckland and elsewhere too.”
“Housing affordability is still stretched in many parts of NZ, and ‘higher for longer’ mortgage rates won’t do anything to ease that pressure.”
Mr Davidson said Wellington was another key part of the country where property values dropped significantly during the downturn, but had also started to turn around relatively promptly.
“Lower Hutt and Porirua, for example, both saw average values rise by 1.5 per cent in November, with the latter’s figure now up by almost 5 per cent in the past three months,” he said.
Diversity in market conditions exists outside the main centres too, with Queenstown (3.2 per cent) and Gisborne (1.9 per cent) posting strong gains in November.
While Whangarei (down 0.9 per cent) and Rotorua (down 0.6 per cent) lagged behind, and Nelson and Invercargill were flat.
Mr Davidson said while values might keep rising, he expects growth to be patchy.
“This ‘recovery’ could remain fairly subdued by past standards, given that housing affordability is still problematic, mortgage rates in general aren’t set to fall materially, and caps on debt-to-income ratios are still on the cards for 2024,” he said.
“We should also never lose sight of the mortgage repricing process that is still going on for existing borrowers, as they face up to finally seeing the interest rate they’re paying reach prevailing market levels over the next six to nine months.”
He said as existing borrowers see their interest rates finally catch up to the higher cash rate, there might be more downward pressure on prices.
“I’m always conscious of the scope for housing activity and prices to move faster than anticipated, due to the emotional or human factor involved,” Mr Davidson said.
“But right now, it’s hard to see the market quickly shaking off the weight of high mortgage rates.”