After being battered by one of the sharpest tightening cycles in the world, there are signs that the New Zealand market might be starting to turn the corner.
According to CoreLogic NZ’s Monthly Housing Chart Pack, property transaction volumes rose 7.5 per cent in May compared to the same time last year.
It’s the first annual increase in sales transactions since May 2021.
CoreLogic NZ Chief Property Economist Kelvin Davidson said the figures provided further signals that the market may be approaching its low point.
“While it’s probably too early to emphatically call it a new trend, it is now looking more certain that sales volumes have finally bottomed out, ” Mr Davidson said.
“The annual increase of 7.5 per cent after such a long decline will be welcome news for many (although not all) property market participants.”
Mr Davidson said new listings remained incredibly tight and are 28 per cent lower than this time last year and 20 per cent below the previous five-year average.
“As the flow of new listings remains low against a backdrop of rising sales, we are starting to see a tightening of stock on the market, which in turn may start to contribute to competitive price pressures,” he said.
“Available listings are about 5 per cent lower than this time last year, with stock tightening in key regions such as Auckland, Bay of Plenty, and Wellington.”
According to Mr Davidson, there were just 6439 new listings over the four weeks ending June 6, down from 8996 this period last year, taking the total stock on market to 33,798 – 4.5 per cent below this time last year.
At the same time, national values fell 10.2 per cent in the year to May, slightly less than the year to March (10.5 per cent) and year to April (10.3 per cent).
The upper quartile continues to lead the downturn, with values down 14 per cent from the peak, compared to 10.9 per cent and 8.8 per cent falls across the mid and lower quartiles.
Meanwhile, the first-home buyers’ market share of 25 per cent remains strong, particularly in Auckland at 28 per cent, while mortgaged multiple property owners (investors) have a comparatively low market share of 20 per cent.
Nationally, rental growth remains within the 3-4 per cent range but is likely to accelerate as net migration increases and rental stock stays low.
Overall, Mr Davidson said 2023 is shaping up as a year of two halves.
“Factors such as a broad peak for mortgage rates and still-strong employment should underpin some kind of growth in sales/mortgage activity later in 2023, with prices finding a floor – which will be good or bad, depending on your perspective,” he said.
“The end of the downturn doesn’t suddenly mean the start of an upturn, however.
“After all, housing affordability is still stretched, and caps on debt-to-income ratios loom large in 2024.”
Mr Davidson said inflation seems to have passed its peak and the Reserve Bank will wait to see the effects of the 5.5 per cent cash rate for this tightening cycle, while mortgage rates are close to, or already at, their peak.