Cotality data shows a buyer-friendly market even as rates rise again
New Zealand property values fell for a third straight month in August, with buyers continuing to hold the upper hand in a market where listing stock remains historically high, according to Cotality's latest Monthly Housing Chart Pack.
The Cotality Home Value Index dipped a further 0.4% in August, extending a 1.3% fall over the past three months and leaving national values down 18.2% from their peak. Auckland and Wellington remain sluggish, while Christchurch has proven more resilient.
"In this buyer-friendly market, property values remain subdued," said Cotality chief property economist Kelvin Davidson (pictured).
A widening gap between buyer groups
Underlying that pattern, sales activity remains soft: there were 6,175 property deals recorded nationally in August, down 11.6% on the same month last year – the eighth consecutive monthly decline.
Cotality's Chart of the Month highlights a growing divide between buyer groups behind that figure.
First-home buyers remain a standout, Davidson said, "accounting for a combined 29.1% of purchases across July and August, hovering at record highs." Movers, by contrast, "remain relatively subdued, which is one reason why sales activity remains weak even though affordability has improved," he said. Mortgaged multiple-property owners sit in the middle at 23.2%, a touch below their long-term average, weighing subdued rents and rising rates against the wider slowdown.
Elevated listing levels are central to that dynamic. New listings totalled 8,383 in the four weeks to 30 August – close to the five-year average of 8,412 – while total stock on the market sat at 27,306, above the five-year average of 26,192.
"This high level of choice is giving buyers a lot of the pricing power," Davidson said, though he noted most vendors are not under pressure to sell: "Most vendors won't be in a forced-selling position, so prices aren't collapsing."
Rate rises add a fresh headwind
That caution among movers is only reinforced by the rate environment. The Reserve Bank's decision to lift the official cash rate to 2.75% on 2 September – its second consecutive hike – has, in Davidson's assessment, created a fresh challenge for a market already struggling to gain momentum. Borrowers felt the increase quickly: within days, all five major banks passed on the full 25-basis-point rise to floating rates, with ANZ and ASB moving to 6.29%, BNZ to 6.34% and Westpac to 6.39%.
The pressure is particularly acute for property investors, where rising rates are squeezing already-thin margins: gross rental yields remain in the high 3% range nationally, lowest in Auckland and Wellington among the main centres, with Cotality noting investor cashflows "are now being squeezed again."
Around 54% of existing mortgages by value are due to reprice onto a new term within the next 12 months, a mix Cotality says leaves many borrowers with some flexibility in the short term even as others face higher rates on renewal.
Rents, meanwhile, are showing early signs of a turning point, with MBIE bond data showing rents over the three months to July up 0.3% year-on-year – the first such rise in nearly 18 months.
Looking ahead, Davidson said the labour market may prove decisive. "It's difficult to see what changes this holding pattern in the near term," he said, pointing to rising employment and better job security as likely prerequisites for renewed value growth – though he noted some investors "will be buoyed by Labour's announcement that they'll keep interest deductibility."
Even so, he added, this "weak patch has seen affordability improve significantly, so there are always two sides to the coin."
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