House sales slumped to their lowest in 31 years last month, excluding 2020.

The latest REINZ data shows just 4,262 houses were sold in April, down from 5,984 in March and down 15.3 per cent compared with the same month last year.

Sales are running 13.5 per cent lower than in April 1992, when 4,929 properties were sold.

Across the country, excluding Auckland, sales counts dropped 11.5 per cent over the past year and 26.9 per cent month-on-month.

REINZ chief executive Jen Baird says the figures show the continuing challenge the economic climate has put on market pace. Prices are also continuing to drop. Baird says while median prices have declined, they are moderating.

The biggest drops in prices were Northland, down 24.7 per cent compared to April last year; Auckland, down 23 per cent; Waikato, down 20 per cent; and Taranaki, down 20.7 per cent. Median prices on the West Coast and Otago were up annually by 8.6 per cent to $379,000 and by 3.2 per cent to $680,000 respectively.

Two districts reached record median prices; Grey District at $398,000 and Ashburton District at $615,000.

Days to sell rose to 47 last month, up nine days compared to April last year, and up two days compared with March. At the end of April, the total number of properties for sale was 28,643, up 1,593 properties (+5.9 per cent) year-on-year, and down 2.19 per cent month-on-month.

Nationally, new listings declined 18.9 per cent, from 8,806 listings in April last year, to 7,142 listings last month. The REINZ House Price Index (HPI), which measures the changing value of residential property nationwide, shows an annual drop of -12 per cent for New Zealand and a -10.7 per cent decline for New Zealand, excluding Auckland.

Difficult winter

The housing market is in for a difficult winter as values across most of the country drop by about $1,000 a week. QV’s House Price Index shows a drop of $161,264 in prices since the peak last year.

The national average house value sits at $902,501, and in April was down $5,236 compared to March and 13.3 per cent less than the same time last year, but 22 per cent higher than before the pandemic began in late February 2020.

Values dropped 3.5 per cent over the three months to the end of April, a slower rate of decline than in the three months to the end of March. It is a marked improvement on the 1.4 per cent average decline in March.

The average rate of home value decline has slowed in 10 of the 16 largest urban areas that QV monitors, including in Auckland, where the rolling three-month rate of reduction has slowed from 5.2 per cent in March, to 4.4 per cent in April.

However, it is still the second-largest average home value drop this quarter, after Whangarei (4.6 per cent). Wellington’s average rate of home value decline has also slowed to 3.7 per cent this quarter, down from a 4.8 per cent quarterly decline in March.

In the South Island, Queenstown was the only one of the country’s main urban centres to record a lift in home value growth at an average of 2.8 per cent, representing a remarkable turnaround from last month’s quarterly decline of 3.2 per cent.

Christchurch (-3.7 per cent) and Dunedin (-3.1 per cent) both recorded notably larger quarterly home value drops last month than they did in March (-1.2 per cent and -1.6 per cent respectively), with the former marking its first double-digit annual decline (-10 per cent) in 14 years.

QV national spokesman Simon Petersen says the market fundamentals have not changed; credit constraints and high interest rates continue to have a stranglehold on the market.

Higher rents

A record 82.2 per cent of landlords are aiming to raise rents over the coming year.

The latest Tony Alexander and Crockers’ Property Managers Property Investors Insight survey shows the average rent rise landlords are seeking has risen to a 10-month high of 6 per cent from 5.6 per cent in March and a low of 5.3 per cent in December.

Alexander says it is not just a matter of rising costs for landlords placing upward pressure on rents.

“The government has actively discouraged growth in the rental stock through tax changes, and a sharp acceleration in the population growth rate courtesy of a new net migration boom is lifting demand. Add in the incentive to switch property use back towards tourism and the supply/demand interaction is increasingly in favour of rents rising at an accelerating pace.”

Rising rents versus falling prices, says Alexander, are rapidly shifting the equation for existing renters in favour of buying and that is going to create an interesting situation maybe late this year. “Prices may have just about stopped falling, but rents will keep rising while population growth accelerates because of the migration boom and new build growth is set to slow down quite a bit.”

‘Rents will keep rising while population growth accelerates’ Tony Alexander

However, he says before people start thinking about rising house prices, they need to remember the Reserve Bank has plenty of tools to dampen the market. LVRs have been used effectively and next year the bank will have debt-to-income ratios (DTIs), which many economists believe it will introduce. At what level any DTIs will be introduced has yet to be revealed.

DTIs are likely to hit investors harder than owner-occupiers and will have the effect of bringing down house price inflation to about 3 per cent a year instead of 6-7 per cent seen in recent years, apart from two years of pandemic-fueled madness when the government unleashed cheap money.

However, after trending down from mid-2021 to the end of 2022 there are underlying signs the number of investors thinking about buying a property in the next 12 months may be edging higher.

But if this is the case the movement is modest. Just over 21 per cent of investors thinking about buying is well below the 25 per cent near two-year average, so overall interest from investors in expanding the pool of rental accommodation remains low.

The 23.4 per cent looking to sell is, on the other hand, slightly higher than the average of 22.7 per cent. It is the highest since May last year. Over the past three months there has been a small recovery in the proportion of investors looking at making a fresh purchase who will buy a new property to 29.2 per cent from 27.9 per cent in March and a low of 24.9 per cent in December.

Building consents

Building consents bounced in March, but new home building is clearly softening. Stats NZ data show the number of new dwellings consented rose 7 per cent to 46,924, after falling 9.4 per cent in February.

However, the number of consents issued was down 8 per cent from last year’s March peak (the highest month on record) but the number is still the third highest for a March month.

Underlying March’s rise in overall consent numbers was a lift in multi-unit consent numbers (townhouses, flats, and units) to 1,820, which followed a large drop over the past few months. Other consents issued in March were for 1,586 stand-alone houses, 327 apartments and 237 retirement village units.

In the March 2023 quarter there were 9,719 new homes consented, down 21 per cent compared with the March quarter last year. The seasonally adjusted number of new homes fell 8.4 per cent, compared with the December quarter last year. This follows a seasonally adjusted fall of 9.2 per cent in the December quarter.

Stronger data

ANZ economists have revised down their predictions of house price falls to 18 per cent from 22 per cent previously.

The bank’s economists say housing market data has come in stronger than expected and on the back of some falls in fixed mortgage rates and the proposed easing of high loan-to-value restrictions, it prompted them to adjust their forecast to 18 per cent based on the OCR peaking at 5.5 per cent next month.

Recent data suggest the floor for the housing market is approaching a little faster than previously forecast, says Sharon Zollner, ANZ chief economist. She says broadly speaking, housing market resilience appears to be boosted by a couple of key factors. Fixed mortgage rates could be close to their peaks, and some longer-term fixed rates have even fallen recently, and net migration has surged in recent months, and if sustained at recent levels could end up leading to materially stronger activity.

“Increased fundamental demand for housing through migration appears to be occurring just as residential construction activity is slowing.”

What’s driving house prices?

HOUSE PRICES: DOWN Nationwide March’s median house price dropped 12.9 per cent annually to $775,000, REINZ data show. For New Zealand, excluding Auckland, median prices were down 9.7 per cent to $695,000. Sales counts eased across the country by 15 per cent annually. The number of residential property sales increased month-on-month by 42.9 per cent. Nationally, new listings dropped 17.7 per cent, from 11,224 listings in March last year to 9,242 listings in March this year.

OCR: UP The Reserve Bank’s official cash rate sits at 5.25 per cent after an unexpected 50bps rise at the beginning of April, with the bank indicating more rises are to come, up to possibly 5.5 per cent.

INTEREST RATES: DOWN Three banks have trimmed back their three-year fixed interest mortgage rates below 6 per cent in anticipation of future OCR cuts boosting competition in longer-term fixed mortgages. ANZ is offering 5.99 per cent as a special rate; BNZ and Westpac have matched it. The three-year term is not generally that popular with home owners, with one and two-year terms attracting much more custom.

BUILDING CONSENTS: DOWN Building consents bounced in March, Stats NZ figures show. The number of new dwellings consented rose 7 per cent to 46,924, after falling 9.4 per cent in February. However, the number of consents issued was down 8 per cent from last year’s March peak, the highest month on record, but the number is still the third highest for a March month. Underlying March’s rise in overall consent numbers to 1,820, which followed a large drop over the past few months.

MORTGAGE APPROVALS: UP Total monthly new mortgage commitments were $6 billion in March, up $2.2 billion from February. The share to investors rose to 17.7 per cent, up from 16.3 per cent in February. Investors borrowed $1 billion, down from $1.2 billion in March last year. First home buyers were loaned $1.2 billion, up from $815 million in February, and owner-occupiers borrowed $3.6 billion, up from $2.329 billion in February.

RENTS: STATIC Stats NZ stock measure shows rents rose 0.4 per cent in April compared with March and were up 3.8 per cent for the year.

MIGRATION: DOWN Work visas have taken a sudden decline, MBIE figures show. About 15,873 people arrived on work visas in April. This was down 22 per cent compared to the 20,442 arrivals in March. As well as the drop in the number of people on work visas arriving in April, MBIE says the number of work visas approved in the same month declined sharply from 28,065 in March to 19,776, down 29.5 per cent.