PHOTO: QV House Price Index June 2024. QV
New Zealand’s Housing Market: Frosty Economic Conditions Lead to Decline in Home Values
New Zealand Aotearoa’s housing market continues to face significant challenges due to frosty economic conditions, causing a noticeable dip in home values across most main centres. The latest QV House Price Index indicates a national average home value decrease of 0.9% over the three months ending June 2024. This decline surpasses the 0.2% reduction observed in May, bringing the average home value to $916,285. While this figure remains 2.8% higher than last year, it is 13.9% ($147,480) lower than the market peak in late 2021.
Regional Performance Highlights
Auckland
Auckland leads the downturn with a 2.6% decline in average home value this quarter, marking five consecutive months of negative growth. The city’s average home value now sits at $1,250,372, with notable declines in Manukau (-3.6%), Rodney (-3%), and Papakura (-2.7%). Only Franklin has experienced an increase, with a 1.9% rise in home value.
Tauranga, Palmerston North, and Wellington
Tauranga and Palmerston North each saw a 1.3% drop in home values, while Wellington recorded a 1.2% decline. In Wellington, Kapiti Coast experienced a 0.9% increase, whereas Upper Hutt saw the largest reduction of 2.2%.
South Island Stability
James Wilson, QV operations manager, noted the relative strength of home values in the South Island, particularly in Invercargill (1%) and Dunedin (1.3%). However, even traditionally robust markets like Christchurch and Queenstown are experiencing stagnation.
Economic Factors and Market Trends
Wilson emphasized the impact of tough economic conditions on potential buyers. With interest rates around 7% and persistent inflation, saving for a deposit, securing financing, and servicing a mortgage have become increasingly difficult. Many prospective buyers are waiting for conditions to improve, potentially after winter or even longer. This has led to reduced competition and flattened growth across much of the country.
Downward price pressure has permeated all market segments, affecting investors, owner-occupiers, and first-home buyers alike. The abundance of listings is also contributing to the cooling market.
Sellers’ Challenges
Sellers are facing increased patience and adjusted price expectations in the current buyer’s market. Many property sales are now conditional on other sales, causing chain reactions that extend sales periods or cause deals to fall through. Sellers must adapt to the new market realities, often adjusting their expectations downward.
Wilson predicts further softening of home values throughout winter, with little indication of a price rebound in the near future. The recent shortening of the bright-line test may result in more listings, offering buyers more choices and maintaining downward pressure on prices. Additionally, the introduction of debt-to-income restrictions and the loosening of loan-to-value ratios are not expected to have a significant short-term impact, especially while interest rates remain high.
Regional Breakdown
Northland
Kaipara’s average home value increased by 0.8% to $868,456, while values in the Far North and Whangarei decreased by 0.1% and 0.6%, respectively.
Waikato
Home values decreased on average, with Thames-Coromandel, Waipa, and Taupo experiencing modest growth. Hamilton saw a slight 0.3% reduction to $781,975.
Taranaki
Values fell by an average of 1.6%, with Stratford and South Taranaki experiencing significant declines.
Hawke’s Bay
Napier and Hastings showed steady growth, with average home values increasing by 0.4% and 0.9%, respectively.
Nelson and West Coast
Nelson saw a 0.9% decline in home values, while the West Coast experienced a 1% decrease, with some growth in Grey District.
Canterbury
Home values in Canterbury grew by an average of 0.3%, with Christchurch remaining flat.
Otago
Home value growth in Otago was largely positive, with a 1.3% increase in Dunedin.
Queenstown and Invercargill
Queenstown’s home value growth remained flat, while Invercargill outperformed with a 1% increase.
Conclusion
New Zealand’s housing market continues to struggle under economic pressures, with home values declining in most regions. As potential buyers remain cautious and sellers adjust to a new reality, the market is likely to see continued softening through the winter months. With high interest rates and inflation, the path to recovery may be slow and uncertain.
SOURCE: QV