Confidence Quietly Returns
Seven regions of the country have had a 30 per cent increase or more in sales volumes month-on-month as the housing market starts to find its feet, writes Sally Lindsay.
2 July 2023
Some parts of the country are showing an increase in sales while buyers and sellers in other parts continue to wait, the latest REINZ data show.
In May the median price dropped 8.2 per cent year-on-year to $780,000, but there was no change month-on-month. New Zealand, excluding Auckland, had a drop in the median price of 6.5 per cent to $685,000 and a 2.1 per cent decline month-on-month.
In the regions, Nelson had the biggest median price rise in May at 2.7 per cent year-on-year and 6.9 per cent month-on-month to $770,000. The West Coast had another increase with a month-on-month rise of 3.1 per cent.
Two districts reached record median prices: Grey District with a 18.7 per cent increase year-on-year ($400,000) and Waitomo District taking top spot with a 53.4 per cent increase year-on-year ($655,000).
The total number of properties sold across NZ last month was 5,752, down from 5,776 in May 2022 (-0.4 per cent), and up 30 per cent month-on-month. For NZ, excluding Auckland, sales counts increased 1.4 per cent year-on-year and 26.7 per cent month-on-month.
Seven regions, Northland, Auckland, Waikato, Wellington, Tasman, Marlborough and Southland all had a 30 per cent increase or more in sales volumes month-on-month, with Marlborough topping the list with 66.7 per cent in sales.
Nationally, new listings dropped 18.1 per cent, from 8,983 listings in May last year to 7,359 listings in the same month this year. Compared to April, listings rose 3 per cent from 7,142. For NZ, excluding Auckland, listings declined 17.4 per cent year-on-year from 5,801 to 4,792. Auckland’s listings were down 19.3 per cent from 3,182 to 2,567 year-on-year, but up 2 per cent on April.
The REINZ House Price Index (HPI), which measures the changing value of residential property nationwide, showed an annual drop of -11.2 per cent for NZ and a -10 per cent decrease for NZ, excluding Auckland.
Prices Bounce Back
House prices in dozens of suburbs across the country have risen in the past three months.
Kaipara District, in the Northland region, had two top performing suburbs over the past quarter, with values in Maungaturoto and Kaiwaka up 4.7 per cent and 3.5 per cent respectively, CoreLogic’s Mapping the Market tool reveals.
Over the past year, the lower half of the South Island has also shown good value with prices increasing in 33 suburbs by at least 2 per cent.
Across the country, the 128 suburbs where prices have increased point to a market that could be near the bottom, says Kelvin Davidson, CoreLogic’s chief property economist. Seventy-one of these suburbs had a median value increase of at least 0.5 per cent.
However, the mapping tool shows over the past 12 months, 860 suburbs declined in value, with 729 of those suburbs down at least 5 per cent. The softest 18 suburbs are all in the wider Wellington area, with falls in the range of 19-24 per cent.
In Auckland, property values dropped in all 195 suburbs analysed over the past 12 months, ranging from less than 5 per cent in areas such as Waiuku, Ponsonby and Omaha, up to more than 16 per cent in Parau, Wattle Downs, and Totara Heights. Fourteen suburbs had a rise of at least 0.5 per cent. Red Hill was the strongest performing suburb in the three months to June, with values rising 2.5 per cent.
All 96 suburbs analysed in Wellington fell in value in the past year, ranging from 1.8 per cent in Te Marua, up to a decline of 21 per cent or more in Boulcott, Stokes Valley and Southgate.
Over the past three months only Aotea saw values rise, while values were flat in Mount Victoria.
Christchurch’s 82 suburbs have shown the most resilience, with Wainui seeing a rise in median values over the past year of 3 per cent.
Over the past three months, 11 suburbs had values rise with Templeton the strongest, up 1 per cent.
In Auckland, the country’s biggest housing market, the average house value has dropped $282,647 since the beginning of last year.
The latest QV House Price Index shows the average value of homes across the entire country has fallen $174,835 since the peak at the beginning of last year.
Over the past three months to May the average house value declined $13,671, leaving the average property nationwide valued at $888,930.
That figure is 13.7 per cent lower than the same time last year and 20.2 per cent higher than its pre-Covid-19 level.
While value drops across the country have remained in the middle 3 per cent range over the past two months, QV operations manager James Wilson says it is still too early to say the market has bottomed out.
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 per cent), Hamilton (-2 per cent), Christchurch (-2.5 per cent), and Wellington (-2.6 per cent).
The biggest value drop between April and May was in Queenstown Lakes where homes on average dropped $18,380. Average Tauranga values also recorded a big drop of $11,311 last month.
Sales Lift, Prices Drop
Auckland property sales have bounced back to what was being achieved at this time of the year pre-Covid.
Sales of 723 were their best in a month since May last year, after hitting their lowest in an April for 22 years.
Barfoot & Thompson managing director Peter Thompson says May’s sales are another sign the Auckland property market has either hit the bottom of the current cycle or is close to it. Sales were a third higher than the average monthly sales for each of the past three months.
The median sales price for the month at $955,000 is down 4 per cent on that for April, while the average price at $1,070,819 is down 1.5 per cent on that for last month.
While the median price paid in May was down 15.1 per cent on that 12 months ago, the average price was down much less at 10.9 per cent.
A good flow of new listings reached the market in May, with 1,262 new listings for the month and at month’s end the agency had 4,390 properties on its books – the lowest number in 14 months.
Buyers have returned to the high end of the market, with 31 homes sold in May for more than $2 million. Sales in the under $750,000 price category were also in demand, with 148 transactions being registered.
New building consents dropped 25.9 per cent in April compared with the same month last year.
Stats NZ data shows consents were also down in April by 30.6 per cent compared to March. This comes after a 25.1 per cent drop in March compared to a year earlier.
On an annual basis new house consents in the 12 months to April were down 9.3 per cent compared to the previous 12 months.
April is the third consecutive month the number of homes consented has been down by more than a quarter compared with the same month the previous year.
The total construction value of all new dwellings consented was $1.169 billion, down 27.5 per cent compared to April last year.
The decline in consents was greatest for apartments (-40.5 per cent) compared with a year ago. Standalone houses dipped -32.1 per cent and townhouses/units -18.2 per cent.
Finding The Floor
ANZ believes the housing market has found a floor.
The bank has revised up its house price forecast but it doesn’t mean prices will stop falling in every region. Some “catch-down” is expected, the bank says in its latest Property Focus report.
The Auckland pulse has turned weak as new listings across the country are pushing inventories back into new lows.
The bank says it now sees house prices lifting on a quarterly basis from here, with a relatively sharp turn to 1.6 per cent quarter on quarter in both the third and fourth quarters this year, which is about the historical average pace.
Thereafter, it sees quarterly growth in house prices slowing, with net migration inflows assumed to sink back as pent-up demand dwindles, and as sticky CPI inflation keeps upwards pressure on the OCR and wholesale rates, the report says.
ANZ believes the RBNZ is likely going to need to make a more-hawkish pivot by November with another OCR hike.
The bank says its updated forecast might seem incredibly rosy, but after accounting for nominal income growth its house price forecast implies a relatively stable house price to income ratio going forward, with housing becoming marginally more “affordable”.
The Rent Scene
Auckland’s average weekly rent rose by just half a per cent during the third quarter of this year, reaching $626.08 at the end of September, up $3.64 on the average at the end of June.
Year-on-year, to the end of September the Auckland average of $626.08 a week is up $20 (3.35 per cent) from last year’s $605.77 for the 16,500 properties managed by Barfoot & Thompson.
Over the past year the city has followed its well-established pattern of rents rising by about 3 per cent annually.
Rents have been steady in the central suburbs and fringes of the city, with increases between 0.02 per cent and 2.23 per cent. The lowest average increase was just 11 cents a week for a central city apartment, for example.
At the same time rents for homes further to the east and south are increasing near and above 4 per cent. In Franklin and rural Manukau the year-on-year rent rise reached 6.49 per cent, about $30 more a week on average.
The agency says there are many factors to support continued price growth at or above 3 per cent.
While some property owners may be looking to increase rents to cover their rising costs, many are also aware of the need to remain accessible as renters tighten their budgets.
What’s Driving House Prices?
HOUSE PRICES: DOWN The median price dropped 8.2 per cent year-on-year to $780,000, the latest REINZ data show. NZ, excluding Auckland, had a drop in the median price of 6.5 per cent to $685,000 and a 2.1 per cent decline month-on-month. Nelson had the biggest median price rise in May at 2.7 per cent year-on-year and 6.9 per cent month-on-month to $770,000. The West Coast had another increase with a month-on-month rise of 3.1 per cent. The total number of properties sold across NZ in May was 5,752, down from 5,776 in May last year (-0.4 per cent), and up 30 per cent month-on-month.
OCR: UP The Reserve Bank’s official cash rate sits at 5.5 per cent after a 25bps rise in May. The RBNZ says it is at the end of its tightening cycle.
INTEREST RATES: UP Following the OCR increase the ANZ and ASB added 25 bps to their floating rates taking them to 8.64 per cent. Even before the OCR was announced, ANZ added +25 bps to its business overdraft and business indicator base rates. Westpac made a +25 bps rise to its floating rate, also taking it to 8.64 per cent. It also raised its one-year fixed rate by +20 bps to 6.99 per cent and cut its two-year fixed rate by -14 bps to 6.45 per cent.
BUILDING CONSENTS: DOWN New building consents dropped 25.9 per cent in April compared to the same month last year. Stats NZ data shows the actual number of new dwellings consented was 45,962, down 9.3 per cent over the year ended April 2022. Compared to the previous month consents were down in April by 30.6 per cent. This comes after a 25.1 per cent drop in March compared to a year earlier.
MORTGAGE APPROVALS: DOWN Total monthly new mortgage commitments were $4.3 billion, down $1.7 billion (28.3 per cent) from $6 billion in March. Mortgage lending in April was the second lowest on record for an April. The monthly decline was largely because of drops in lending to non-first home buyer owner-occupiers, which fell $1.1 billion (31.4 per cent) to $2.5 billion, and lending to investors, which fell $349 million (32.7 per cent) to $718 million. On the other hand, lending to first home buyers only fell by $196 million (15.8 per cent) to $1 billion.
RENTS: STATIC Stats NZ stock measure shows rents rose 0.3 per cent in May compared with April and were up 3.8 per cent for the year.
MIGRATION: UP From a 19,000 annual net outflow early last year to a net inflow of 72,000, the latest MBIE migration figures are a surge of breakneck speed. The peak is likely to be 95,000-100,000. Most of the new migrants are arriving from India, the Philippines, China and South Africa. More than 27,000 Kiwis also returned home, but that was more than offset by the almost 54,000 leaving. A net loss of 26,100 New Zealand citizens over the past year was recorded.