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Following consecutive interest rate hikes and stricter lending rules, the property market in New Zealand experienced two years of sluggish sales, resulting in the country’s largest sales decline since 1983. However, there are signs of a turnaround, as indicated by the latest data from CoreLogic NZ’s Monthly Housing Chart Pack.
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In May, residential sales numbers (including estate agent transactions and private sales) saw a noteworthy increase of 7.5% compared to the same period last year. This marks the first annual growth in sales transactions since May 2021. However, new listings during the four weeks ending on June 6 remained significantly lower, with a decrease of 28% compared to last year and 20% below the five-year average.
Kelvin Davidson, Chief Property Economist at CoreLogic NZ, commented that these figures suggest that the market may be approaching a trough. While it is too early to definitively call it a new trend, the reversal of the long decline in sales volumes is encouraging for many participants in the property market. The annual increase of 7.5% after a prolonged decline will be welcomed by many, though not all.
The data also reveals a tightening of available listings in the market, especially in key regions like Auckland, Bay of Plenty, and Wellington. Compared to the same time last year, the current inventory of available listings is approximately 5% lower. This tightening of stock could potentially contribute to competitive pricing pressures.
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Looking ahead, Davidson expects 2023 to be a year divided into two halves. Factors such as reaching a general peak for mortgage rates and stable employment should support some level of growth in sales and mortgage activity in the latter part of the year. Additionally, property prices are anticipated to stabilize. However, the end of the downturn does not automatically signify the start of an upturn, given the ongoing issue of housing affordability and the looming influence of debt-to-income ratio caps in 2024.
Key highlights from the June Housing Chart Pack include:
- The total value of residential real estate is estimated at $1.57 trillion.
- National property values experienced a decline of 10.2% in the year leading up to May, slightly smaller than the declines in the year to March (10.5%) and the year to April (10.3%).
- The upper quartile of the market continues to lead the downturn, with values dropping by 14% from their peak. In comparison, the mid and lower quartiles experienced declines of 10.9% and 8.8% respectively.
- The number of property sales in May saw a 7.5% increase compared to the previous year, marking the first annual rise since May 2021.
- The total number of new listings over the four weeks ending June 6 was 6,439, a decrease from 8,996 during the same period last year.
- The overall stock available on the market is 33,798 properties, which is 4.5% lower than this time last year.
- First-time homebuyers hold a strong market share of 25%, with Auckland having an even higher share of 28%. On the other hand, multiple property owners (investors) have a relatively low market share of 20%.
- Rental growth nationwide remains within the range of 3-4% but is expected to accelerate due to increasing net migration and limited rental stock.
- Gross rental yields across the country have returned to 3% for the first time since March 2021, primarily due to continued declines in property values.
- Around 50% of existing mortgages in New Zealand, by value, are currently on fixed rates. However, over the next 12 months, these mortgages are set to be repriced at new (generally higher) rates.
SOURCE: CORELOGIC