‘Little respite’ for falling New Zealand property market

PHOTO: Property values rose 2.6 per cent in Christchurch in June.

New Zealand could be on the cusp of a Global Financial Crisis-like property market downturn with “little respite” for falling house prices in the coming months, according to an industry expert.

CoreLogic New Zealand Head of Research Nick Goodall said nationally property valued fell 0.8 per cent in June, which was the third consecutive month with a drop at that rate.

The House Price Index (HPI) also showed the quarterly fall of 2.3 per cent was the biggest three-month decline since February 2009, which is just before the market bottomed out after the GFC.

“As the downturn sets in, and with interest rates set to rise further, greater consideration is now being given to ‘how long and how far will this go’,” Mr Goodall said.

“Of course no one knows for sure but the long recovery after the GFC offers a glimpse into one potential scenario which could unfold.”

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Post GFC, Mr Goodall said the market took the shape of a “bathtub”, with a gradual initial decline of 9.9 per cent over 17 months, followed by a period of relatively flat conditions, before increasing back to the pre-GFC peak five years later.

“While the economic and lending environments are remarkably different between 2008 and 2022, housing affordability is more thinly stretched, and interest rates are rising, not falling like in the late 2000s,” he said.

“Under these circumstances it is difficult to foresee any respite for falling house prices in the near term.

“Affordability constraints coupled with higher interest rates and tighter lending conditions are likely to keep a lid on housing demand over the coming months and probably until interest rates start to fall again.

“Although a drop in housing prices will support an improvement in affordability, higher mortgage costs and stricter lending policies will probably outweigh the renewed affordability advantage.”

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Auckland recorded the biggest drop in property values in June, with the HPI recording a 1.9 per cent fall for the month and a 4.9 per cent decline for the quarter.

The average value of a property in Auckland is now $1,445,624.

But Mr Goodall said the figures needed to be viewed in context of market changes.

“When it comes to property values in Auckland, it’s important to look past median sale prices as they are often affected by a change in the mix of properties reaching agreement over the two periods being analysed, whereas an index measures all properties in an area regardless of whether they have transacted,” Mr Goodall said.

House prices nationally drop 3.4%

“In other words, Auckland could see more expensive standalone dwellings dominating sales in a given month, but then cheaper townhouses might take over the next month.”

The HPI showed Christchurch recorded the most growth in property values in June, up 2.6 per cent to $783,216, followed by Hamilton with a 1.8 per cent jump to $880,947.