The first signs of a recovery in New Zealand property prices have begun with values increasing 0.4 per cent last month and 0.1 per cent for the quarter according to CoreLogic NZ.
The uptick marks the end of the recent downturn that saw prices decline 13.2 per cent, or $138,000, from their highs.
Despite the pullback, average values are still almost 25 per cent above the ‘pre-Covid’ levels of March 2020.
CoreLogic NZ Chief Property Economist, Kelvin Davidson said price increases were widespread across the main centres last month.
He said values in Hamilton and Christchurch rose by more than 1 per cent, Dunedin by 0.8 per cent, and Wellington and Auckland also recorded increases over the month.
While Tauranga was virtually flat, posting a minor drop of 0.1 per cent.
“The key fundamentals for house prices have been looking stronger for a reasonable period of time now,” Mr Davidson said.
“October’s data has brought that first increase at the national level, but it’s early days and there’s still a lot of diversity in market conditions across the country.”
Mr Davidson said although a new government hadn’t been formalised, the shift in voting to the centre-right seems to have bolstered housing market confidence, despite mortgage rates edging higher recently.
“We’ve also seen net migration rise to a new record high, which is boosting property demand,” he said.
He said low levels of unemployment had also contributed to the turnaround.
“The resilience of employment has meant the vast majority of households have successfully managed to rejig their finances as they reprice from older, lower fixed rates, onto today’s higher levels,” he said.
Mr Davidson said the loosening in the CCCFA rules from May, and slightly relaxed LVR settings from June, had also played a role.
The flow of new listings also remain low.
“As a result, there’s been a re-emergence of some degree of competitive price pressures, as buyers attempt to secure a property in a market where there’s a bit less choice,” he said.
Across Auckland, property prices rose in October, but not all areas saw an increase.
Papakura surged 2.2 per cent, while Rodney, North Shore, and Waitakere saw values lift by half a per cent (0.5 per cent).
However, Auckland City, Manukau, and Franklin all saw modest falls in values.
“This 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,” Mr Davidson said.
“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 area where signs of growth have emerged in recent months, but there’s variability still in play too.
“Porirua, for example, saw average values rise by 2.3 per cent in October, but Lower Hutt, Upper Hutt, and Wellington City were more stable, and Kapiti Coast actually dropped by 1.4 per cent,” he said.
Outside the main centres, the changes in property values in October were also relatively diverse, with Rotorua, Gisborne, Whangarei, and Hastings recording solid increases of almost 1 per cent or higher, but Invercargill, New Plymouth, and Whanganui all recorded falls of at least 1 per cent.
Mr Davidson expects prices to continue to rise, but the increases will remain patchy.
“This ‘recovery’ could remain fairly subdued by past standards, given that housing affordability is still problematic, mortgage rates aren’t set to fall anytime soon, and that caps on debt-to-income ratios are still on the cards for 2024,” he said.
He said first-home buyers continue to remain active, however, mortgaged multiple property owners, including investors, have been quieter than normal,
“The next six to 12 months could be really interesting, with some investors looking to buy again, with a view to their tax bills being lower in the future,” Mr Davidson said.
“But even with a smaller tax bill, low rental yields and high mortgage rates still make it tricky to get the sums to work on an investment purchase.
“As such, we don’t anticipate a full-scale return by property investors.”
