Housing Ship Steady with Prices Flat
The housing market continued to hold its breath last month with prices tracking sideways and sales still low.
17 November 2023
REINZ data shows while sales are off their earlier lows, they aren’t displaying a strong upward trend. In part, this “pause” may be related to the timing of October’s election, which may have seen some buyers sitting on the sideline, says Westpac senior economist Satish Ranchhod.
In addition, the past month saw borrowing costs pushing higher, which will have dampened demand.
Looking into the details of the October housing market update, house sales fell 10 per cent over the month – adjusting for normal seasonal variations. That’s a sizeable drop, but probably overstates any softness, as not all sales that occurred over the month will have been recorded yet.
A better gauge of the housing market is the level of sales. Monthly house sales have been running at a rate of about 5,000 to 5,500 for most of the past year. That’s up from the weak levels last year but still fairly low, Ranchhod says.
Across the country REINZ figures show a small 2.5 per cent drop from 5,762 to 5,619 in the number of properties sold month-on-month, and an 8 per cent increase from 5,205 to 5,619 compared to October last year.
Across the regions, 12 of the 16 regions had an increase in the number of properties sold year-on-year, with Northland up 36.1 per cent; and Southland up 29.6 per cent.
Ranchhod says sales aren’t really showing signs of breaking higher at this stage. Looking across regions, sales have been firmer in areas like Auckland and Canterbury. In contrast, sales in Wellington and many other parts of the country remain sluggish.
However, REINZ chief executive Jen Baird says real estate agents are reporting a lot more activity across buyer groups. “They’re noticing more investors and first home buyers looking to secure properties sharing the market with vendors who are showing a willingness to be realistic with their price expectations. We can see signs of that in the median prices this month.”
On the price front median sale prices are a mixed bag across the country, with the national median unchanged compared to last month, staying at $795,000 – about where it has been for much of the year, REINZ figures show. Year-on-year, there is a slight national decline of 2.8 per cent, while New Zealand, excluding Auckland, is down by 4.7 per cent to $691,000 from $725,000.
Median sales prices year-on-year increased for several regions, with Tasman, up 2 per cent; West Coast, up 2.6 per cent; Canterbury, up 3.2 per cent; and Southland, up 2.4 per cent. In all other regions median sales prices dropped year-on-year last month.
The House Price Index fell 0.4 per cent, after adjusting for normal seasonal variations, and so has effectively tracked sideways over the past three months. Compared to this time last year, prices are down 2.3 per cent … that’s the smallest decline in more than a year.
The average number of days to sell has continued to drop back, falling to 38.
At the end of last month, the total number of properties available for sale across NZ was 25,602, down 3.7 per cent or 975 properties from 26,577 year-on-year, and up 8.6 per cent month-on-month.
Nationally, new listings increased 2.6 per cent from 9,289 listings to 9,529 year-on-year, and increased 21.9 per cent compared to September. NZ, excluding Auckland, had an increase month-on-month of 23.4 per cent and year-on-year 1.2 per cent.
Every region showed an increase in listings month-on-month, with just over 58 per cent for Northland; 40.2 per cent for Wellington; 36.8 per cent for Marlborough, and five other regions increasing by over 20 per cent.
A good wind
Ranchhod says he expects the housing market to pick up over the coming year.
“Population growth is booming, with net migration rising to a fresh record high in the year to September.
“In addition, the incoming government has signalled it will ease regulations affecting property investors, such as restrictions on interest deductibility. We’re forecasting that house prices will rise by close to 8 per cent over 2024.”
Providing a brake on house price growth is high interest rates, he says. “That’s made serviceability tougher for first home buyers and those looking to upgrade. It also means that net rental yields are still low.”
Given the persistence in domestic inflation, Ranchhod says the bank expects the RBNZ to keep the OCR at contractionary levels over the year ahead.