Declining property values are petering out, CoreLogic’s House Price Index shows.

The average property is now worth $905,466, which is $137,795 or 13.2 per cent below the peak, but still $177,190, or 24.3 per cent, higher than March 2020’s pre-Covid figure.

The index shows national values nudged just 0.2 per cent lower last month, with the three-month change also easing to a 1.8 per cent fall.

Several key sub-markets recorded increases and CoreLogic’s chief property economist, Kelvin Davidson, says it’s only a matter of time until the national average flattens out or even starts to rise.

“Although values have continued to edge lower nationally, the floor is likely to be near, with many of the key fundamental drivers now turning around,” he says.

“It’s notable that mortgage rates are likely to now be close to their peak, although further small changes can’t be ruled out as global markets, and hence wholesale financing costs, remain a little jittery.”

Davidson says on top of that, migration has significantly boosted property demand, and labour markets remain robust.

“We’re also now starting to see the impact of the loosening in the loan-to-value ratio rules from June 1 flow through to more low-deposit lending for both owner-occupiers and investors with a 35-40 per cent deposit, who were previously locked out.”

Election influence

He says if National wins the election and pushes through its new housing policies, which include a shorter bright-line test, it may drive increased investment purchases, but also some sales by existing investors, given no/reduced liability for capital gains tax.

“And while the phased reinstatement of mortgage interest deductibility could boost sentiment, the hard sums might not be altered too much – many purchases will still make big cashflow losses for a start, because rental yields would still be low and mortgage rates high. Of course, existing investors will pay less tax.”

The softened foreign buyer rules, Davidson says, could also boost demand and prices, although probably more so in local markets than across the country as a whole.

“In Queenstown, for example, about 10 per cent of properties are valued at $2 million plus, and we know it’s already more popular with foreign buyers, who could potentially exacerbate the shortages of stock at ‘affordable’ prices that already exist.”