There are signs of life in the New Zealand property market, with new data showing sales volumes are on the rise and starting to put upward pressure on prices.
According to CoreLogic NZ, the rise in sales, in conjunction with the low level of stock on the market, should start to lead to modest price gains over the next couple of months.
CoreLogic NZ Chief Property Economist Kelvin Davidson said that sales increased 17 per cent in the 12 months to June, on the back of an eight per cent rise in May, indicating that sales volumes were bottoming out.
“The CoreLogic House Price Index still fell further in June, by 1.2 per cent,” Mr Davidson said.
“But there’s always a natural lag between sales and prices, and also ‘deals on the ground’.
“It wouldn’t be a surprise to see stability or event modest gains on our index within one to two months.”
Mr Davidson said the uplift has come on the back of peaking mortgage rates, the still-strong labour market, high net migration and slightly looser credit rules.
“It’s important to note that this increase has started from a low base, but as pent-up demand starts to emerge it’s likely we’ll see more increases in sales activity in the remainder of 2023,” he said.
Mr Davidson said the flow of new listings still remains weak, down 30.8 per cent compared to the same period last year and almost 25 per cent below the previous five-year average.
He said with the weekly flows of new listings coming onto the market still running at low levels, the early upturn in sales is eating into the total stock of listed property, especially in key areas such as Auckland, Bay of Plenty, and Wellington.
“The flow of new listings coming onto the market each week has remained sluggish month-to month, as would-be vendors choose to ‘wait and see’, given the uncertainty about how long a sale might take and/or the potential price achieved,” he said.
“Arguably it remains a ‘buyer’s market’, with the national total stock of listings on the market still relatively high.
“However, there is also a downwards trend now evident for stock levels too, which may start to contribute to competitive price pressures.”
According to Mr Davidson, first home buyers remain active, with a 25 per cent share of purchases in the past three months.
He said there are signs that first-time buyers are becoming more active, boosted in part by the loosening of the LVR rules on June 1.
While those current homeowners who are looking to move, was was still fairly subdued by their standards, although there were hints of a turnaround.
This suggests that wider market confidence levels might have started to lift off the floor Mr Davidson said.
Mr Davidson said despite the positive signs, the market still has a lot of work to do given inflation is still high and interest rates are at a level not seen in many years.
“The end of the downturn doesn’t necessarily mean the market is destined for a sharp rebound,” he said.
“Housing affordability is still stretched, and caps on debt-to-income ratios loom large in 2024.
“The second half of the year still looks likely to hold some kind of housing market upturn – which will be good or bad, depending on your perspective.”
