Prices drop for the sixth consecutive month
House prices continued to decline through May and are now down some 6% since their peak last November, latest figures from the Real Estate Institute (REINZ) showed.
Kiwibank economist Jeremy Couchman described the month as “another bloodbath” as the REINZ house price index fell for the sixth month running, and with annual house price growth now slowed down to just below 4%.
Read more: Falling house prices offer some relief for hopeful first-home buyers
“Since peaking in November, the seasonally adjusted HPI [house price index] has fallen 6%,” Couchman told NZ Herald.
Sales fell 28.4% from a year ago (seasonally adjusted), while the median number of days to sell is now at 40 days, up from the long-run average of 39 days.
“As buyers sit out the carnage from ringside, the supply of listed property trends higher,” Couchman told the publication. “All the above indicates that house price falls are yet to plumb the lows of the current cycle.”
Kiwibank said prices will likely fall by about 10% or 11% by the end of the year, while others are predicting even larger falls. Westpac economists have forecasted a 15% drop and financial services firm Jarden has suggested a possible 18% slump.
Falls on that scale were still “a distinct possibility,” Couchman said.
The Kiwibank economist also said the labour market, with its record-low unemployment rate, would continue to cushion households – both mortgage holders and renters – from a nasty income shock.
New Zealand also continues to suffer from a housing shortage, albeit drastically reduced while the border was closed. And despite a record number of building consents being issued, material and labour shortages were hampering the construction sector.
“As a result, the net increase in NZ’s housing stock is not likely to be as dramatic as current record-high building consents data imply,” Couchman told NZ Herald.
Read next: Building consents down in April, but still at record levels
ANZ economist Miles Workman said that there was a fair amount of regional divergence in the data this month.
Otago and Southland (HPI) broke the national trend and lifted month on month, by 0.8% and 3.1%, respectively. These, however, have a very small weighting in the national index, Workman said.
Auckland, which accounts for more than a third of the market, saw its HPI fall 0.4% month on month. Taranaki experienced the largest decline, at -2.4%, while the Canterbury and Wellington HPIs slipped 0.4% and 1.5%, respectively.
“When housing gets moving (one way or another) it tends to gather momentum, and right now it's travelling southbound,” Workman said. “That on its own suggests there's plenty more slowing to come over the cold months ahead, but the RBNZ has also upped the hiking ante recently, and that's expected to take the housing temperature down by another degree or so.”
ANZ has downgraded its house price forecast slightly to a 12% peak-to-trough decline (previously 11%), NZ Herald reported.
