ABOVE In late 2022 90 per cent of Auckland suburbs experienced a median value drop.

House prices are still dropping, with properties taking longer to sell across ew Zealand, REINZ January data shows.

However, REINZ chief executive Jen Baird says while prices continue to ease the pace of the decline is slower, and the market has settled at its new pace.

Buyer caution is evident in the drop in sales count, down 23.6 per cent month-on-month and down 39 per cent annually from December 2021. There has also been a 55.3 per cent increase in inventory, now sitting at 26,057 properties.

Baird says with interest rates rising and banks stress testing at 8.1-8.5 per cent, buyers’ ability to secure finance and service a mortgage remains a key issue for those taking their time to purchase. As a result properties are spending longer on the market with 40 being the median days to sell, 11 days longer compared with December 2021.

‘Sellers are tending to be more realistic and will usually meet the market’

“The median sale price has dropped nationally by 12.2 per cent overall to $790,000 and declined 7.9 per cent for New Zealand, excluding Auckland, to $700,000. The REINZ House Price Index (HPI) showed an annual drop of 13.7 per cent in the value of residential property nationwide which is in line with the sale price changes.”

Regional median house prices have declined across the board except for Northland which had an increase of 3.3 per cent and Taranaki 5.1 per cent. These were the only regions to have a rise in median price compared to December last year.

Wellington, Auckland, Gisborne and Tasman had the largest drop in median sale price with -20.2 per cent, -18 per cent, -17.3 per cent and -14.1 per cent respectively. Wellington is now into its 14th consecutive month of being in the bottom two ranked regions for the year-on-year House Price Index movements.

Baird says salespeople around the country say sellers are tending to be more realistic and will usually meet the market through negotiation. Although it’s taking longer to sell, sellers are still getting results.

AUCKLAND MARKET

House prices in more than 90 per cent of Auckland’s suburbs have dropped significantly.

Over the three months to the end of December, 90 per cent of Auckland suburbs (180 of 201) have had a median property value drop; 73 of those suburbs have fallen at least -2 per cent. At the other end of the spectrum, only eight had a rise of 1 per cent or more, CoreLogic’s interactive Mapping the Market tool shows.

Bucking the trend is Herne Bay, which remains Auckland’s most expensive suburb, with a median value of $3.6 million. It has had a slight pickup in value of 0.5 per cent since September. By contrast, areas such as Sunnyhills and Omaha have seen their median value drop $70,000 or more over the past
three months.

Across the rest of the country prices have continued to slide. In the latest Mapping the Market tool update, 776 of the 948 suburbs analysed recorded a fall in median values between September and December. The suburb of Kawakawa in the country’s Far North had the highest percentage growth rate, up 6.5 per cent to a median of $469,550.

The lifestyle suburbs of Arrowtown and Lower Shotover, both in the South Island’s Queenstown-Lakes District, had the highest dollar increase for the quarter, increasing 4.9 per cent and 4.8 per cent, equivalent to $102,750 and $74,500 on average respectively.

CoreLogic NZ’s chief economist Kelvin Davidson says only 66 suburbs, about 7 per cent, recorded a growth rate of 1 per cent or more in the past three months, a low proportion which reiterated the acceleration of the housing downswing in 2022.

Of those many were located in the country’s rural and more affordable southern districts, including 38 of those 66 suburbs, which have a median value of $700,000 or less.

Across the country 56 suburbs recorded a fall in median value of 5 per cent or more, with the two largest declines hitting Korokoro in Lower Hutt City and Mangakino in the Taupo District, which fell -10.2 per cent and -10.7 per cent respectively.

Price expectations moved up fractionally though remain distinctly negative. And the large group of people expecting interest rates to rise did get a bit smaller, the survey results show.

CAUTIOUS SELLERS

Last year ended on a troubling note for Auckland’s biggest real estate agency, Barfoot & Thompson, selling 37 per cent fewer homes during the year than in 2021 and the average number of homes sold each month at 706, its lowest for 12 years.

Just 527 properties were sold in December and overall 8469 during the year, the lowest number since 2010 when 7987 were sold.

Half of the properties sold last month were in the $1-2 million range, 32 per cent were in the $750,000 to $1 million bracket, while sales of houses priced at more than $2 million accounted for just 7 per cent, or 37 of the total number.

Barfoot & Thompson managing director Peter Thompson says while sellers are listing they are cautious about accepting too low an offer.

“In December the effect of this reluctance was particularly felt in the under $750,000 price category, and we sold only 90 homes in this price segment. At the same time, we sold 37 homes for more than $2 million, 12 of them for more than $3 million.”

‘Westpac is forecasting house prices nationwide will fall by a further 10 per cent’

The median price for the month at $1,067,500 was 16 per cent below the peak, but prices on a month-by-month basis have remained static for four months. The average sales price, which at $1,155,131 for December, was the highest average price in three months.

Real house prices will fall 30 per cent back to pre-pandemic levels, erasing any recent gains, say Westpac economists.

In the bank’s Economic Overview the economists say the weakening in the housing market has been widespread, but it has been particularly stark in larger centres. Notably, prices in Auckland have fallen 16 per cent, while prices in Wellington are down a whopping 18 per cent.

With interest rates increasing, Westpac is forecasting house prices nationwide will fall by a further 10 per cent over 2023 and 2024 combined. Coming on the back of the falls already seen, that will leave prices down 20 per cent from their peak in 2021. The bank’s previous forecast was a 15 per cent fall.

Because the downturn in house prices comes at the same time as other prices in the economy are rising, including building costs and wages, it means “real” house prices are set to fall 30 per cent from their 2021 peak, says the bank.

BUILDING SECTOR

Economist Tony Alexander has been warning about a widespread weeding out of businesses in the residential building sector since early 2021, but says he did not expect it would take until now for the pullback in activity to really get underway.

Construction is expected to be one of the major swings south this year in the housing market.

Alexander believes change will come shortly. “There is a lot of weakness to come in the townhouse building sector and summer is going to bring many examples of building companies going under and projects being left half-completed with people losing their money.

“Like excessively high inflation, and a boom/bust cycle in house prices, this is another way in which the Reserve Bank has worsened stability in our economy. It seems to have become a net negative for the country.”

He says it seems reasonable to expect the following this year:
• falling consumer spending for the first half of the year and retail business failures
• house prices edging lower until the middle of the year
• fixed mortgage rates for periods beyond one year falling before the middle of the year
• house construction embarking on a two to three-year period of decline
• falling numbers of properties listed for sale
• firm net migration inflows
• probable change in government late in the year
• the kiwi dollar either rising or falling against the currency of your choice – or the other way around.

STARK CONTRAST

House values across the country fell further from January to November than they have in more than 15 years. The

.November QV House Price Index shows values are now 10.2 per cent lower, or $107,747 less in real dollar terms, than at the start of the year.

Homes dropped in value by 2.9 per cent nationally over the three months to the end of November, a slight improvement on the 3.9 per cent quarterly decline at the end of October, with the average value now sitting at $945,568.

The latest figures are a stark contrast to the same time in 2021, when the QV House Price Index showed values had climbed by an average of 25.5 per cent from January to November.

In fact, the closest comparable year to this one is 2008, amid the global financial crisis (GFC), when home values fell by an average 9 per cent nationally from January to November, and 9.6 per cent total during the calendar year.

Of New Zealand’s main urban centres, the largest home value drops last year occurred in Wellington (-18.7 per cent), Palmerston North (-14.5 per cent), Hastings (-12.5 per cent), Auckland (-12.2 per cent), Napier (-12 per cent), Dunedin (-11.5 per cent), Hamilton (-11.3 per cent) and Tauranga (-9.3 per cent).

WHAT’S DRIVING HOUSE PRICES?

HOUSE PRICES: DOWN

The median sale price has dropped nationally by 12.2 per cent overall to $790,000 and declined 7.9 per cent for New Zealand, excluding Auckland, to $700,000, the latest REINZ data shows. The REINZ House Price Index (HPI) showed an annual drop of 13.7 per cent in the value of residential property nationwide, which is in line with the sale price changes. Regional median house prices have declined across the board except for Northland which had an increase of 3.3 per cent and Taranaki 5.1 per cent. These were the only regions to have a rise in median price compared to December last year.

OCR: UP

The Reserve Bank’s official cash rate sits at 4.25 per cent, with the bank indicating more rises are to come up to possibly 5.5 per cent.

INTEREST RATES: UP

ASB’s senior economist Chris Tennent-Brown expects floating rates to peak at between the mid 8 per cent and mid 9 per cent range this year as the OCR rises. But this does not have as much of an effect on mortgage borrowers because only a small portion of home loan lending is on floating rates. Tennent- Brown says he expects one to five-year fixed rates to peak in the high 6 per cent to mid 7 per cent range. Two-year special rates for borrowers with 20 per cent equity at the main banks range from 6.15 per cent to 6.74 per cent.

BUILDING CONSENTS: UP

There were 50,209 new homes consented in the year ended November 2022, up 3.2 per cent compared with November 2021, Stats NZ data shows. There were 28,364 multi-unit homes consented in the year ended November 2022, up 24 per cent compared with November 2021. The number of stand-alone houses fell 15 per cent to 21,845 over the same period.

MORTGAGE APPROVALS: DOWN

A total of 16,701 mortgages were issued in November, down 10.5 per cent from October and a record low for a November month since 2013. The average value of new mortgage commitments across all borrower types fell 1.9 per cent from $369,626 in October to $362,553 in November. Investors borrowed $957 million, up from $909 million from October but down from $1.527 billion in November 2021. First home buyers were loaned $1.357 billion up from $1.219 billion in October, and owner-occupiers borrowed $3.656 billion, up from $3.379 billion in October.

RENTS: UP

Stats NZ stock measure shows rents rose 0.2 per cent in November compared with October and were up 4 per cent for the year.

IMMIGRATION: UP

Stats NZ data showed a net gain of 3343 migrants for October, narrowing the annual outflow to 4117. The migration was made up of a net loss of 15,100 New Zealand citizens, partly offset by a net gain of 11,000 non-New Zealand citizens. About half the NZ departures were destined for Australia. Kiwibank is forecasting significant net migration inflows of more than 30,000 people this year.