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House Prices Stumble in the Pace of Gains

CoreLogic’s chief property economist says the slowdown in monthly gains is a reminder the emerging recovery remains tentative.

By: Sally Lindsay

1 February 2024

While the average value of houses across the country rose 0.4 per cent last month, or $3,696, it was a drop in the pace of gains in November of 0.7 per cent and December (1 per cent).

Since September’s trough, property values have now risen 2.5 per cent, bringing the national average to $928,184, or 11 per cent below the recent peak, CoreLogic’s latest Property Price Index shows.

Although CoreLogic expects sales and volumes to lift this year, the property data company says the main centres are no doubt being boosted by extra demand from large migration.

But with typically higher ratios of house prices to incomes than the provinces, the Reserve Bank’s proposed DTI rules may become more binding in the cities over the medium term after they come into effect later this year, says Kelvin Davidson, CoreLogic’s chief property economist.

A key theme for this year, he says, will also be the relative shifts in activity for first home buyers and mortgaged investors. “Last year first home buyers had a blinder, dominating in terms of market share. However, higher rents, greater interest deductibility, lower deposit requirements, and a possible drop in mortgage rates could pull some investors back into the market this year.”

Davidson says the slowdown in the pace of monthly gains is a timely reminder the emerging recovery trend remains tentative and shows some variability from region to region.

“The mood in the housing market has certainly turned since the middle of last year, given a fillip by the change of government, and its property policies that are friendlier to investors. This mindset shift is reinforcing the effects of the underlying fundamental drivers, such as continued employment growth and high migration.

“The Reserve Bank’s proposals around loan-to-value (LVR) and debt-to-income ratio (DTI) rules, if enacted, will operate in tandem. However, the DTIs may not bind straight away so the net effect on the market in the near term could be positive.”

He says some buyers will already be starting to anticipate a likely easing in the LVR rules from the middle of the year, which will allow more owner-occupiers to buy with less than a 20 per cent deposit and reduce the required deposit for investors from 35 to 30 per cent.

Even though most indicators are pointing up, there’s still the challenge of high mortgage rates to contend with for new borrowers and those who are repricing existing loans.

“Granted, there’s now a whiff of official cash rate cuts on the horizon, which will help mortgage rates to drift lower on the popular, shorter fixed terms, but that’s probably a story for the second half of 2024, not the first,” Davidson says.


Within Auckland, Franklin recorded the strongest rise in average property values in January, with a lift of 2.1 per cent.

“A bit of lingering weakness in that market over the prior months was always likely to be ‘caught up’ at some stage,” he says.

Manukau also saw values rise by more than 1 per cent, but the rest of the Auckland sub-markets were a little softer in January, including no change in Waitakere. Over the past three months, Papakura has been a bit sluggish (-0.1 per cent), but most other parts of Auckland have seen gains of 1.6 per cent or more.

“Auckland’s property market has certainly started to turn around, and although significant net migration inflows are probably boosting rents more than house price, the effects of strong population growth will still be accumulating across the various segments,” Davidson says.


Wellington’s sub-markets generally saw further growth in January, with Lower Hutt and Kapiti Coast both up by at least 0.5 per cent. But Wellington City itself was a little more subdued (0.2 per cent rise), and Porirua dropped 1 per cent to start the year.

When taken over a slightly longer three-month horizon, Porirua has still shown an increase of 1.5 per cent, with Lower Hutt up by nearly 5 per cent, and gains of 2-3 per cent over the same period in Kapiti Coast and Upper Hutt.

“The wider Wellington property market is certainly playing a part in the emerging national upturn, especially in the two Hutt Valley areas,” Davidson says.

“That said, these parts of the country, and especially Wellington City itself, could become interesting markets to watch should the government decide to pare back the size of public sector workforces more significantly in the coming years.”

Regional House Price Index

The expectation that this year’s property market upturn could be mercurial is reinforced by the provincial value results for January.

For example, after falls in December, Gisborne and Napier bounced back in January, rising 3 per cent and 1.4 per cent respectively. By contrast, after a sizeable rise in December, Rotorua fell back in January, while Hastings also saw property values dip a little on the latest data.

Queenstown, once again, stands out in terms of house price performance. Values were up 0.7 per cent in January and are 6 per cent higher than a year ago, standing at nearly $1.8 million.

“Clearly, Queenstown is a still a magnet for wealthy buyers, whether local or from out of town. And strong demand to live and work in the area as tourism snaps back is seemingly contributing to price pressures as well,” Davidson says.


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