Will the NZ house price downturn end soon?

Uncertainty remains high but there now seems to be light at the end of the tunnel, economist says

Will the NZ house price downturn end soon?

Property market activity levels remained subdued in March, albeit not as weak as they have been, and prices dropped a further 1.1%, for an annual decline of 10.5%, CoreLogic reported.

According to CoreLogic’s monthly update on the country’s residential housing market, green shoots are beginning to emerge among metrics such as listing numbers, sales, volumes, and an easing in price falls, signalling a possible end to the country’s extended property downturn, despite early April’s 50-basis-point cash rate hike.

“Value trends remain weakest in the North Island, with parts of Canterbury and the West Coast still recording some modest increases,” said Kelvin Davidson (pictured above), CoreLogic NZ chief property economist. “Yet there were also hints in the sales data for March that the worst may now have passed for activity, and with new listings flows each week still very low, the total stock of property available for sale on the market is now just showing the first signs of tightening a little.”

CoreLogic NZ’s Housing Chart Pack showed average property values slipped 2.4% in the three months to March, taking the annual decline to 10.5%, surpassing the worst point of the Global Financial Crisis. 

While Davidson did not rule out further price falls in the short term, he said there was little movement among banks and lenders to pass on the most recent cash rate hike, suggesting mortgage rates may have reached their peak, which in turn, enables borrowers to quantify their “worst case.”

“Any suggestion that interest rates have topped out will provide buyers and sellers with more confidence and is eventually likely to result in a turnaround in housing sentiment,” he said. 

“When you also consider continued high employment levels – and employers wanting to retain current staff at all costs – rising net migration, and the possibility that some investors could start to return to the market as they try to pre-empt debt to income ratio caps next year, there’s a growing sense that the market’s downturn could end in the second half of 2023. Of course, uncertainty remains high. But there does now seem to be light at the end of the tunnel.”

Below are some key Housing Chart Pack highlights:

  • New Zealand’s residential real estate has a total combined value of $1.57 trillion.
  • Auckland City posted the smallest fall in Q1 values, down 0.8% in the March quarter, while Papakura recorded the largest fall, down 6.1% over the period 
  • Wellington saw a -20% fall in average property values in the 12 months to March, the largest of the main centres, while Christchurch experienced the most marginal falls, declining -2.9% for the same period
  • Sales volumes in the 12 months to March were 30.9% lower than a year ago
  • Over the four weeks ending April 9, there were 7,680 new listings compared to 10,907 for the same period in 2022
  • Total stock on market is 36,172, well above the five-year average of 30,803
  • First-home buyers accounted for 25% share of purchases over Q1 2023
  • Annual rental growth is around 3% in the 12 months to March
  • Around 50% of NZ’s existing mortgages by value are currently fixed but due to reprice onto more expensive rates over the next 12 months. 

Download and subscribe to the monthly CoreLogic Housing Chart Pack at corelogic.co.nz/news-research/reports/housing-chart-pack.

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