NZ Property Downturn Eases Once More

The
residential property market’s downward trajectory has
eased slightly for the second month in a row – but we
could yet be in for some increased volatility in the months
ahead.

The latest QV House Price Index shows home
values decreased by 3.4% nationally over the three months to
the end of May 2023 – a slight improvement on the 3.5%
quarterly reduction in April and the 3.9% quarterly
reduction in March – with the average value now sitting at
$888,930. That figure is 13.7% lower than the same time last
year and 20.2% higher than its pre-Covid-19 level.

The
average rate of home value decline has slowed this quarter
in 11 of the country’s 16 largest urban areas –
including in Auckland (-2.3%), Hamilton (-2%), Christchurch
(-2.5%), and Wellington (-2.6%). The latter’s average rate
of decline has even dropped below the national average
(-3.4%) for the first time since the downturn
began.

Queenstown once again managed to buck an
otherwise pervasive downward trend amongst the main centres,
with home values rising by an average of 2.4% for the May
quarter. Otherwise the quarterly rate of decline increased
in Tauranga (-4%), New Plymouth (-2%), Nelson (-2.4%) and
Marlborough (-4%) but only by an average of between 0.1% and
0.6% compared to last month’s index.

Quotable Value
(QV) operations manager James WIlson said it was still too
soon to call this the bottom of the market. “It is still
very early days and sales volumes remain low across the
country. We would still need a few more months of continued
softening to claim conclusively that we’re at the bottom
of the market.

“When the market does hit bottom, we
won’t suddenly see values begin to increase across the
board. Instead, what we’re likely to see is a bumpy
landing, with some centres reaching the bottom of their
descent before others. Certain locations and property types
may begin to experience some growth sooner rather than
later, whereas others may remain flat or continue to soften
for a period.”

He said areas that appealed to
first-home buyers and investors would likely be the first to
rise. “One interesting trend that we have observed is the
relative strength of areas that have experienced strong
first-home buyer activity over the past 12-18 months. In
fact, most areas of the country that have experienced
positive value growth or held relatively steady over the
last quarter have had average values of well below $1m. In
other words, ‘first home buyer
territory’.

“While investors haven’t removed
themselves entirely from the market, they have continued to
adopt a wait-and-see approach in many markets. However,
indications that the Official Cash Rate has peaked could
entice them back, with valuers and real estate agents at the
‘coal face’ of the market already reporting a small
uptick in interest. Time will tell whether we do see a
growing number of investors represented in sales volumes
over the next few months, competing for entry level
stock.”

Meanwhile, Mr Wilson said there still
remained a high level of uncertainty within the market
overall. “There’s a generally cautious mindset out
there, especially among many ‘Mum and Dad’ buyer types.
While these buyers remain inactive, value levels in areas
that used to be strong are likely to remain pretty weak.
Strong net migration numbers may add some heat into the
housing market over time, but it’s likely we’ll begin to
see the impact of this on the rental market
first.

“Now, as we head into winter, many eyes will
turn to the election to see if any new or unforecast
policies begin to emerge that may impact certain buyer types
more than others. However, history shows us that elections
don’t typically have a significant impact on the housing
market. Most likely, we’ll see some buyer types remain on
the sidelines until the result comes in. But it looks likely
we’re in for a few more bumps in the road between now and
then.”

Auckland

Auckland’s average rate of
home value reduction has slowed for the third month in a
row.

The region’s average home value dropped just
0.3% during the month of May to $1,258,521. This is a slight
improvement on the 0.5% average loss in home value that was
previously reported for April this year, as well as average
monthly reductions of 1.5% and 2.5% in March and February
respectively.

Home values are 14.4% lower on average
than the same time last year, with the quarterly rate of
decline easing from 4.4% in the last QV House Price Index to
2.3% in the latest.

Local QV valuer Hugh Robson
commented: “The Auckland market has remained fairly quiet
over the past month or so, but the rate of decline in house
prices appears to have eased somewhat. This may be a signal
that the market is ‘bottoming out’. Only time will tell
for certain.”

“Mortgage rates remain high and many
owners who purchased a property over the past 2-4 years are
facing the prospect of re-fixing their mortgage at a
considerably higher interest rate, coupled with a property
that has decreased in value
considerably.”

Northland

There are a number
of geographic variations across the Northland region’s
housing market this month.

Home values have continued
their downward slide in Whangarei, dropping by an average of
3.5% this quarter – a slight improvement on the 4.6%
quarterly decline reported in last month’s QV House Price
Index. Values are also down 9.4% in the Far North this
quarter, and up 3.6% in Kaipara District.

Home values
are down in Whangarei by an average of 13% since the same
time last year, with the Far North also showing a
double-digit decline (10.8%) annually. Kaipara is showing
more resilience, with values down 7.9% year on
year.

Tauranga

Home values continue to subside
in Tauranga – but there are signs that the market is
approaching the bottom of its current correction
cycle.

The latest QV House Price Index shows the
average home has reduced in value by 4% this quarter to
$1,004,147, a slightly faster rate of reduction than the
3.7% reported in last month’s figures. On an annual basis,
the average value is now 15.8% lower than the same time last
year.

QV property consultant Derek Turnwald said there
were early signs of a shift in market sentiment. “It’s
still early days and it will take time for a change in
confidence in the residential market and in the larger
global economy post pandemic. But there are signs that
things are beginning to change now.

“First-home
buyers and ‘hand sitters’ who have been in a position to
buy or sell but have patiently waited for stability in the
market are starting to show some interest now. Even
investors are becoming increasingly active – but many
others will be waiting to see what this year’s election
result will be.”

In the meantime, he said net
migration was continuing to build. “This will create
significant new demand for residential property –
especially in the larger centres, including
Tauranga.”

Waikato

Hamilton’s residential
property market hit a small speed bump in May.

The
average home value increased by 0.4% last month to $779,007,
breaking a four-month trend of declining home values in the
city. But the average home value is still on average 2% less
than it was three months ago, and 11.1% lower than the same
time last year.

QV property consultant Marshall Wu
said sales volumes were significantly lower than the same
period last year. “Market sentiment remains relatively
subdued, with no sign of interest rates easing in the near
future. Additionally, the cost of living continues to rise
with annual inflation remaining high. Agents are reporting
longer selling periods with fewer buyers in the
market.”

Meanwhile, home values have reduced by an
average of 3.4% across the wider Waikato region this
quarter.

“There are signs that Waikato property
prices may be starting to stabilise as we move into the
cooler months of the year. Though several factors continue
to contribute to uncertainty in the market – including
limited supply, changes in lending rules, and the coming
2023 General Election,” Mr Wu
added.

Rotorua

Home values appear to be
holding steady in Rotorua.

The city’s average home
value dropped just 0.2% this quarter to $641,633, following
a slow-but-steady May that saw values slip back just 0.1% on
average.

QV property consultant Derek Turnwald said he
was seeing early indications that the correction was coming
to an end and that the residential market was bottoming
out.

“First Home buyers are realising that the
market is reaching the end of a decline and are showing
stronger interest now. Banks are beginning to relax a little
on the subject of loan application scrutiny, and as of 1
June the Reserve Bank has relaxed loan-to-value ratio
criteria slightly for owner occupiers and investors,” he
said.

“Investors are starting to show some interest
in the market, as they also sense now that the market is
close to bottoming out. Although most of them are still
likely waiting to see if National takes power later this
year and changes some of the tax laws that the current
Government put in place to make investment in property
ownership less attractive.”

Taranaki

The
Taranaki region’s property market largely stayed the
course in May.

Home values fell across the region by
an average of 2.2% this quarter – just 0.2% worse than the
quarterly rate of reduction reported in last month’s QV
House Price Index.

In New Plymouth, the rolling
three-month average rate of home value reduction has
increased from 1.5% in March, to 1.7% in April, and now 2%
in May. The average home value is now $706,762, which is
6.1% lower than the same time last year.

In the
neighbouring districts of Stratford and South Taranaki home
values have reduced by an average of 4.9% and 2.3%
respectively this quarter.

Hawke’s Bay

The
average rate of home value decline has slowed across the
wider Hawke’s Bay region.

The latest QV House Price
Index shows the average home value decreased this quarter in
Napier and Hastings by 3.4% and 1% respectively, down from
quarterly reductions of 4.2% and 2.3% in the previous
index.

The average home value in Napier is now
$742,741, which is 14.6% lower than at the end of May 2022.
In Hastings, that figure is $773,825, which is 13.2% lower
than the same time last year.

Meanwhile, home values
increased by an average of 1.6% in Wairoa this quarter. All
other districts saw a decline of between 1% and 4%, with the
average regional rate of reduction decreasing across the
region by 1.4% overall.

QV Hawke’s Bay manager
Damian Hall commented: “The Hawke’s Bay market is
possibly showing signs of flattening, with the decline in
house prices starting to slow generally. The Reserve Bank’s
recent cash rate hike was lower than the previous one, and
so the sentiment is that the country is starting to get a
grasp on inflation. Mortgage rates are also showing signs of
slowing.

“This is good news for first-home buyers
who appear to have been more active in the market over the
past couple of months. Investors are starting to look around
again but are not completely active just yet. Some older
stock is starting to shift and agents are beginning to see
things pick up again.”

Palmerston
North

Palmerston North’s average rate of home value
decline has slowed for the third consecutive
month.

The city’s average home value is now
$624,137, which is 14.4% lower than the same time last year.
It declined by 1.3% during the May quarter, which is a
marked improvement on figures quoted in the past three
iterations of the QV House Price Index – 3.9% in February,
2.7% in March, and 2% in April.

Local QV registered
valuer Olivia Betts commented: “We continue to see a
levelling out within the market, which is expected to
continue until interest rates stabilise and then eventually
abate. Meanwhile, demand for residential property remains
subdued generally and the number of sale transactions is low
as we now move into the winter
months.”

Wellington

The downturn has slowed
once more in Wellington, indicating that the residential
property market’s downturn could well be bottoming
out.

The latest QV House Price Index shows home values
went down across the region by an average of 2.6% throughout
the May quarter – an improvement on average declines of
3.7% and 4.8% in the three months to the end of April and
March respectively.

It’s the first time since the
downturn began that home values in the Wellington region
have tracked downward at a slower quarterly rate of decline
than the national average (-3.4%).

Local QV senior
consultant David Cornford commented: “Value declines in
the Wellington region have been relatively small over the
last two months, providing further support that we may be
at, or close to, the bottom of the market. Only time will
tell for certain. In the meantime, the market remains
relatively quiet and buyers continue to lack a sense of
urgency.”

“The next biggest foreseeable variable
impacting the property market is likely to be the General
Election. We expect many people will hold off on their
purchasing or selling decisions until after this. If a
National government is elected, it is likely that investors
may start to become more active in the market again,
competing with first-home buyers and potentially supporting
a market recovery.

“First-home buyers currently have
little competition from investors, which combined with a
slight easing of bank lending criteria, is currently
providing them with a relatively good opportunity to enter
the market.”

The largest home value declines this
quarter occurred once more in Porirua (-7.7%) and Kapiti
Coast District (-4.5%). The region’s average home value is
now $831,673, which is 19.1% lower than the same time last
year.

Nelson

Home values in Nelson are on
average 9.3% lower than the same time last year.

The
latest QV House Price Index shows the city’s average home
value is now $783,640, following a decline of 2.4% during
the May quarter – weakening further from the 1.8%
quarterly decline reported in last month’s index.

QV
Nelson/Marlborough manager Craig Russell said property
values continued to retract but at a relatively slower pace
than we’ve seen previously. “Confidence in the property
market appears to be turning a corner with the Reserve Bank
indicating the OCR is now at peak levels, and the easing of
loan to value restrictions.”

“There is still a
glut of properties for sale in the $900,000 to $1,500,000
price bracket – particularly in the wider Richmond area.
These properties need to be competitively priced to meet the
market, and so we’re continuing to see some price
reductions to align price expectations with the
market.”

West Coast

Home values all but
broke even this quarter across the wider West Coast
region.

The latest QV House Price Index shows values
increased by an average of 4.3% in the May quarter in
Buller, and decreased by 0.1% in Grey and 3.5% in Westland,
with the regional average sitting 0.2% higher
overall.

Residential property statistics continue to
fluctuate on a shorter time scale due to lower-than-usual
sales volumes. However, home values continue to largely hold
steady on an annual basis in Buller (+0.9%), with Grey
District (-1%) and Westland District (-3.7%) showing only
small reductions by national standards.

For
comparison, the national average home value is down 13.7%
year on year.

Canterbury

Home values are down
2.5% on average in the Garden City this quarter.

That
is despite a relatively strong May which saw
Christchurch’s average home value increase by 0.8% to
$727,585.

Local QV registered valuer Olivia Brownie
commented: “Christchurch values have bounced back a bit
from the previous month, which could be attributed to a more
active May in the property sector for Christchurch, with
more sales than the previous month.

“We may even be
past the point of seeing any more significant declines in
property values for the city. The latest figures could be an
early indication we are reaching the bottom of the trough,
but we still expect the decline will continue to be
inconsistent with so many factors still at
play.”

“The slight adjustment of the First Home
Grant price caps has now come into effect – we note that
properties in the $500,000 to $800,000 value range have seen
more enquiries as a result,” Miss Brownie
added.

Meanwhile, home values have reduced by an
average of 2.1% across the wider Canterbury region this
quarter, despite Hurunui (0.3%), Waimakariri (0.5%),
Ashburton (1.4%) and Waimate (2.3%) all recording positive
growth throughout the three months to the end of May
2023.

Dunedin

Home values have continued to
ebb away in Dunedin, albeit at a discounted rate in
May.

The latest QV House Price Index shows the
city’s average home value decreased by 2.8% this quarter
to $617,545, which is a slightly slower rate than the 3.1%
quarterly decline reported in last month’s
index.

The average home value is now 11.5% lower than
at the end of May last year, with the largest annual
reductions occurring on the peninsula and coast (-14.7%) and
in central Dunedin (-12.1%).

Local QV registered
valuer Rebecca Johnston commented: “We’re seeing values
flatten out compared to the previous month, down 0.3% in May
compared to a 2.2% average decline back in April. While it
feels like we are levelling out at the bottom of the cycle
now, the election later this year will provide further
direction and certainty on that.”

She said the
number of real estate listings had dropped across the city
in May, with a continued shortage of rental properties.
“This is putting upward pressure on rents. We’re seeing
the strongest demand for one and two bedroom
rentals.”

Queenstown

Queenstown’s
residential property market continues to slowly track in the
opposite direction to much of Aoteraoa New
Zealand.

The latest QV House Price Index shows homes
in Queenstown were worth 3.1% more on average at the end of
May 2023 than at the same time last year. Though the average
home value went down 1.1% to $1,718,497 in May, that figure
is still up 2.4% for the quarter.

Local QV registered
valuer Greg Simpson commented: “We note that there is
currently reduced sales volumes and fluctuating but still
positive value growth for residential property overall. The
Queenstown Lakes District has selling prices that are above
other districts and this is likely to continue given the
recovery of the tourism industry and the general shortage of
housing in the main centres of Queenstown and
Wanaka.”

He said the Reserve Bank’s latest OCR
increase would continue to have a “cooling effect” on
the housing market. “There’s been strong restraint
applied to the housing market from tightening credit
conditions.”

Invercargill

Residential
property values all but broke even in Invercargill last
month.

The city’s average home value went down just
0.2% to $454,159 in May. However, that figure is still 7.1%
lower than the same time last year – including a reduction
of 2.1% for this quarter.

Local registered valuer
Andrew Ronald commented: “The latest QV House Price Index
shows residential property values dropped by 0.2% in May,
compared to a small increase of 0.6% the month before. These
limited changes indicate to me that price declines may
indeed be levelling off in Invercargill.”

“There
is still much less demand now compared to early 2022 and a
greater number of properties on the market. While there is
still healthy demand from first home buyers, there are
limited investors as a result of continued interest rate
increases and changes to tax deductibility rules,” Mr
Ronald
added.

 

ENDS

 

Simon
Petersen
QV Communications Manager
[email protected] 
(09)
361
7216