NEW HOUSING CRISIS: Asking prices down 2 percent in just a month, largest-ever drop

House prices have decreased in the past month, with the average home dropping in price by a record amount, new data suggests.

Trade Me on Tuesday released its latest property price index, showing the site’s average asking price was $949,700 in May. While that’s up 15 percent from 12 months ago, it’s down 2 percent from April – the biggest monthly drop ever.

Outside of Auckland, prices dropped 1.1 percent between April and May.

“Often prices cool a little as we go into the colder months but last month’s data is beyond anything we’ve seen in previous years,” said Trade Me Property sales director Gavin Lloyd. “The whole market is in flux and we’re seeing this reflected in every corner of the country.”

All regions except Gisborne and Nelson/Tasman saw prices drop, with the biggest decreases on the West Coast, down 4.2 percent month-on-month, and Southland down 2.4 percent.

“Southland, Wellington, Auckland and Northland regions saw the next biggest price drops, with their average asking prices all down 2 percent month-on-month in May,” Lloyd said.

Treasury’s Budget economic and fiscal update last month shows house prices were expected to rise by 5.8 percent this year before dropping by 2.5 percent in 2023. That follows an increase of 29.7 percent last year.

“Having more options than ever before is really taking the pressure off buyers and eliminating that fear of missing out that was behind much of the price growth over the past couple of years,” said Lloyd.

Rising interest rates and inflationary pressures have been contributing to cooling the housing market, experts have said. The Reserve Bank last month hiked the official cash rate by 50 basis points to 2 percent.

On Monday, Realestate.co.nz said sellers were shying away from auctions as the heat was coming off the housing market.

But recent CoreLogic data showed the share of houses being sold to first home buyers had dropped sharply despite the property market downturn, with prices remaining high and tighter lending rules playing a part.

To reflect this, the Government at last month’s Budget removed house price caps from its first home loan scheme and significantly increased the caps for first home grants. Housing Minister Megan Woods said the changes recognised “the changes in house prices over the past year” and would provide a “greater choice of homes for prospective first home buyers”.