Investors Return To The Market
Price falls are slowing, with rises seen in some areas leading investors back to the market, Sally Lindsay has the latest.
1 September 2023
The winter chill has been taken off the housing market, latest REINZ data shows.
Nationally, house sales lifted 1.6 per cent, to 4,903 last month compared to last year and were up 10.8 per cent in Auckland, but on a month-on-month basis sales were 15.6 per cent.
Across the regions, sales were up year-on-year in Waikato by 9.4 per cent, Bay of Plenty 13.7 per cent, Nelson 3.9 per cent, West Coast 31 per cent and Canterbury 10.1 per cent.
At the end of July, the total number of properties for sale was 23,090, down 12.4 per cent, or 3,268 properties, from 26,358 year-on-year, and down 6.4 per cent month-on-month.
At the same time, the median sale price dropped 4.9 per cent year-on-year to $770,000 across the country. In Auckland, it dropped below $1 million to $990,000.
The median sale price also took a tumble in the regions year-on-year, with Waikato down 8.9 per cent; Bay of Plenty, down 7 per cent; and Wellington, down 8.9 per cent. It has not been all bad news though. Prices were up in Marlborough, by 0.3 per cent; Southland, 1.2 per cent; and Central Otago, up 4.6 per cent.
REINZ chief executive Jen Baird says while sales counts are up the number of listings is falling. “More competitive prices and a ‘get in now’ attitude is bringing more buyers out ahead of this year’s election,” she says.
New listings dropped 17.6 per cent year-on-year, from 7,470 listings in July last year to 6,156 last month, and a 1 per cent decline compared to June from 6,218. New Zealand, excluding Auckland, listings dropped 19.5 per cent year-on-year from 4,778 to 3,847. Baird says the looming election and ongoing tighter economic conditions are seeing sellers holding back.
The national median days to sell remained relatively stable at 48. The West Coast had the shortest median days to sell at 28, while Tasman had the longest at 80.
The bottom of the housing market beckons, with the nation’s three-month rolling rate of decline dropping for the fourth straight month.
The QV House Price Index for July shows the average home dropped in value by 1.5 per cent nationally over the July quarter. This is a smaller rate of decline than the 1.8 per cent in June, and considerably lower than the 3.5 per cent and 3.4 per cent quarterly declines in April and May respectively. The national average now sits at $888,999.
That figure is 10.2 per cent less than July last year, but just 0.3 per cent lower than at the end of June. Nationwide four of the 16 main urban areas QV monitors had growth in the quarter – Hamilton (0.1 per cent), New Plymouth (0.4 per cent), Christchurch (0.8 per cent) and Invercargill (0.8 per cent).
Home values continue to fall in Auckland (-1.5 per cent), with the average price at $1,243,610, which is 11.8 per cent lower than at the same time last year; Wellington (-1.7 per cent), with the average price at $824,100; Nelson (-2.4 per cent); Whangarei (-1.4 per cent); Queenstown (-1.3 per cent); and Rotorua (-0.5 per cent). The latter two had increases in last month’s index, reflecting the level of heightened volatility in the market.
QV operations manager James Wilson says it wouldn’t be unusual if home values continue to yo-yo across the country, mainly as a result of declining sales.
“While investors never removed themselves from the market entirely, they have adopted more cautious attitudes in recent times. Now there are growing numbers competing for entry-level stock in areas they view as offering good value for money.”
He says there are still also some property types, like small to medium development sites, for example, which have taken significant hits to their values since the downturn began and are likely to continue to decline as demand for these properties has dropped away.
Statistics NZ data shows 9,888 new homes were consented in the June quarter, down sharply by 20 per cent compared to the second quarter of last year.
On an annual basis Statistics NZ data show building consents down 12 per cent or 44.5 new homes from the June 2022 year.
The monthly stats show the seasonally adjusted number of new dwellings consented rose 3.5 per cent, after falling 2.3 per cent in May.
Stand-alone houses had the biggest drop, falling 22.6 per cent or 5,415 fewer homes consented in the year to June than the previous 12 months. Townhouses and unit consent numbers fell 7.1 per cent.
In June there were 3,402 new homes consented, comprising: 1,551 townhouses, flats, and units; 1,515 stand-alone houses; 190 retirement village units; and 146 apartments, meaning a serious decline in building work is on the horizon.
Sales Still Slow
Auckland’s average sales price retreated a little, to $1,067,070, down 2.8 per cent in July compared to June, Barfoot & Thompson data show.
July’s average was just 1.7 per cent lower than the previous three-month average.
The median price for the month at $950,000 was down 4.5 per cent when compared to June.
“For the third month in a row, sales hit more than 700 and prices remained stable, indicating the market has found a natural plateau and we can expect an uplift in activity as we approach spring,” Peter Thompson, Barfoot & Thompson’s managing director says.
Agents sold 727 homes during July, up just more than 2 per cent on June, and 19 per cent higher than July last year.
At 1,213, there was a steady, if slightly reduced flow of new listings coming onto the market. This number was down about 4 per cent on June, but more than 3 per cent higher than the same month last year.
“At month’s end, the agency had 4,076 available listings on its books, which is the lowest number since January last year, but there has been a significant increase in enquiries from potential vendors.
“During July, 217 of all homes sold were under $750,000, and at the other end of the scale, 10 properties sold for in excess of $3 million,” Thompson says.
Some Price Rises
CoreLogic’s latest House Price Index (HPI) shows there are house price rises in some parts of the country and values not dropping as fast over the rest of New Zealand.
The HPI dropped by 0.4 per cent in July – the smallest decline since the 0.3 per cent fall-off in January and a significant drop from June’s 1.2 per cent decrease. The annual decline in the HPI is 10.1 per cent.
Values in five of the seven main sub-markets in Auckland were either flat or higher in July, with most of the other main centres down a marginal 0.2 per cent or 0.3 per cent in the month.
For the wider Wellington market, values increased by 0.3 per cent, the city’s first rise since February last year.
Shifting national fundamentals appeared to be mirrored across most of the main centres, with Hamilton, Tauranga, Christchurch and Dunedin each recording a fairly modest drop in average property values last month, of either 0.3 per cent or 0.2 per cent.
Auckland’s drop was more significant at 0.6 per cent, but that weakness was not universal for the super city as a whole, instead occurring in only one or two of its sub-markets, Kelvin Davidson, CoreLogic’s chief property economist says.
The July result was notable in Wellington for being the first increase in average property values (0.3 per cent) in 17 months. Among the sub-markets, Kapiti Coast was flat in July, as was Lower Hutt. But Upper Hutt rose by 0.2 per cent, Wellington city by 0.4 per cent, and Porirua by 0.6 per cent.
“Reaching a trough in the downturn does not mean there’s likely to be a sudden snapback to widespread and strong gains in house prices and it will be unsurprising if some areas record further falls in the coming months, while others stabilise or see mild increases,” Davidson says.
Generally speaking, the “next phase” of the cycle could still be relatively muted, given affordability remains stretched, mortgage rates aren’t set to drop anytime soon, and also in light of the prospect of caps on debt-to-income ratios for mortgages early next year.
The average weekly rent for an Auckland home reached $642.28 at the end of June, up 3.37 per cent or $20.95 on the same time last year.
Barfoot & Thompson’s property management general manager Samantha Arnold says the change is in keeping with the pace of increases over the previous two years, which ranged between 2.97 and 3.35 per cent.
Two different parts of the city stood out in the data drawn from more than 17,000 rental properties across the region:
The Franklin/rural Manukau area with a 6.59 per cent rise in its average weekly rent and the Manukau city centre with a 5.86 per cent rise.
On average, it’s the most affordable area to rent in Auckland, second only to central city apartments.
In the city centre, the apartment market only regained its strength last quarter as workers, students and tourists returned at scale following the pandemic.
Previously the market had been down and stagnant for several years, with price changes hovering below 1 per cent until finally rebounding to 3.46 per cent at the end of March 2023.
This quarter, it’s up a further 5.86 per cent, or $30.03 on the average weekly rent.
City centre apartments now attract an average weekly rent of about $542.16, compared to a pre-pandemic average of $520.64 in late 2019.
The share of new mortgage lending to investors in July totalled $939 million, down from $990 million in May and also down from $1,054 million in June last year.
During the peak of the market in June 2021 investors borrowed $1,428 billion, the latest Reserve Bank figures show.
The share of new mortgages borrowed by investors fell from 16.9 per cent in May to 16.5 per cent in June. Annually, the share to investors has fallen from 17.4 per cent in June 2022. The overall lending figures to investors for the first six months of this year are the lowest for a first half year, since 2014.
LVR restrictions were eased at the beginning of June and investors are slowly returning to the market.
Anecdotal evidence from real estate agencies is they have noticed an uptick in investors wanting to buy before the election as they believe if the government changes house prices will starting rising the next day, although this is not a view shared by economists, who say it will still take some time for the market to turn around.
What’s Driving House Prices?
House Prices: Down Nationwide, July’s median house price dropped 4.9 per cent year-on-year to $770,000 across the country. In Auckland it dropped below $1 million to $990,000. The median sale price also took a tumble in the regions year-on-year, with Waikato down 8.9 per cent, Bay of Plenty, down 7 per cent; and Wellington, down 8.9 per cent. Sales lifted 1.6 per cent, to 4,903 last month, compared to last year and were up 10.8 per cent in Auckland, but on a month-on-month basis sales were 15.6 per cent. New listings dropped 17.6 per cent year-on-year, from 7,470 listings in July last year to 6,156 last month, and a 1 per cent decline compared to June from 6,218.
OCR: UpThe Reserve Bank’s official cash rate stays at 5.5 per cent after July’s Monetary Policy Committee meeting. The RBNZ says it is at the end of its tightening cycle.
Interest Rates: UpThe BNZ has lifted mortgage rates for the second time since the Reserve Bank’s May pause on OCR increases. It has raised its six-month rate from 7.85 per cent to 7.99 per cent, and its four and five-year rates from 6.89 per cent to 7.09 per cent. Westpac, meanwhile, has dropped its two-year fixed term to 6.69 per cent.
Building Consents: DownStats NZ data show new building consents have dropped on an annual basis by 12 per cent or 44.5 new homes in the June year. In June the seasonally adjusted number of new dwellings consented rose 3.5 per cent, after falling 2.3 per cent in May. Stand-alone houses had the biggest drop, falling 22.6 per cent or 5,415 fewer homes consented.
Mortgage Approvals: DownTotal monthly new mortgage commitments were $5.7 billion in June, $0.2 billion or 3 per cent down from $5.9 billion in May and 6.1 per cent lower than in June last year. Lending to investors fell 5.1 per cent to $0.9 billion in June, movers and owner occupier lending fell 2.2 per cent to $3.3 billion and to first home buyers it fell 2.6 per cent from May to $1.4 billion in June. There were 15,498 new mortgages taken out, down 4.7 per cent from 16,258 in May. In comparison to June last year, the number of new mortgage commitments rose by 3.7 per cent from 14,952. The average value of new mortgage commitments across all borrower types rose to $366,900 in June, up 1.8 per cent from $360,400 in May. The average value has fallen 9.4 per cent from $405,000 in June 2022.
Rents: UpStats NZ stock measure shows rents rose 0.4 per cent in May compared with April and were up 4.1 per cent for the year.
Immigration: Up Annual net migration from all countries rose to 86,800 in the year to June – made up of a net gain of 121,000 non-New Zealand citizens and a net migration loss of 34,800 New Zealand citizens. It was the biggest net migration loss since the year to April 2013.