The downturn in the New Zealand property market gained renewed pace in February, with values falling at their fastest rate since October 2022.
Nationally values fell 1 per cent in February, according to the latest CoreLogic New Zealand House Price Index.
While smaller than October’s fall of 1.3 per cent, it was a much larger drop than December’s 0.2 per cent fall and January’s 0.3 per cent decline.
Over the past 12 months values have fallen 8.9 per cent.
CoreLogic NZ Chief Property Economist, Kelvin Davidson said latest results didn’t come as a surprise, citing the Reserve Bank of New Zealand’s recent rate hiking cycle.
“Despite mortgage rates being at or close to a peak, the RBNZ’s grim outlook for inflation and the economy more broadly was always going to weigh further on property values,” Mr Davidson said.
“February’s 50 basis point hike in the official cash rate is also likely to restrain demand.”
Christchurch was the best-performing major centre in February, clocking a 0.4 per cent increase in values.
Values in that city are only 1.7 per cent lower than they were a year ago.
All other main centres saw values decline, with Wellington values falling the furthest (down 1.6 per cent).
CoreLogic House Price Index – National and Main Centres
|Change in property values||Average Value|
Values continued to drop in the country’s largest market, Auckland, with a 1.4 per cent monthly fall reported.
Values in Auckland are now 11 per cent lower than they were a year ago.
While rising rates continued to put mortgage holders under strain, Mr Davidson did not anticipate a rise in distressed listings.
“… in terms of any mortgage repayment stress, it’s important to note that their (the RBNZ’s) projections do not envisage a material fall in employment. Instead, the unemployment rate is set to rise on the back of a larger labour force, with those new entrants finding it harder to secure a job,” he said.
“This implies a degree of insulation for existing employees/homeowners, but that new borrowing and house purchasing activity could remain fairly subdued.”
Early indications were that the transition from low fixed rates to higher variable rates for existing borrowers was being well tolerated, he added.
Looking ahead, Mr Davidson predicted there could be a rebound in sales volumes towards the end of the year.
“Our forecasting model points to a mild rebound in property sales volumes in the second half of 2023, and the Reserve Bank’s projections for the CoreLogic House Price Index point to an effective trough late this year, followed by broadly flat prices in 2024 and only a mild rise in 2025,” he said.