Market Fails To Thaw As Spring Arrives
Sally Lindsay discovers while first home buyers are being enticed back into the market, most properties are still unaffordable to many, particularly in the larger hubs.
1 November 2022
The housing market failed to thaw in the first month of spring. The REINZ house price index (HPI) posted its 10th consecutive monthly fall in September and house prices are 8.1 per cent lower than a year ago – the biggest annual decline since the GFC in 2009.
The median number of days to sell a property held steady at 49 days (seasonally adjusted), still about 10 days above the REINZ average and indicative of further house price falls ahead.
House prices are now down 12.6 per cent from their peak in November. In Auckland, the HPI dropped 1.3 per cent in September and is now down 17.3 per cent from its peak. In Wellington, the HPI is down 19.8 per cent from its peak. Canterbury is down 7 per cent from its peak.
During September median prices for residential property increased 2 per cent annually, from $795,000 in the same month last year to $811,000 this year. Month-on-month, this is a 1.4 per cent increase from $800,000 in August.
The median residential property price for New Zealand, excluding Auckland, dropped 0.7 per cent, from $720,000 to $715,000. There was a month-on-month
increase of 2.1 per cent from $700,000 in August.
The West Coast had the biggest annual increase in the median price – up 30.9 per cent to $360,000. Auckland’s median price dipped 8.3 per cent compared to September last year, down from $1,140,000 to $1,045,000. North Shore had the greatest drop down 28.6 per cent, followed by Papakura, down 16.9 per cent.
In Wellington, the median price was down 3.5 per cent annually, from $850,000 to $820,000. South Wairarapa had the biggest drop, down 27.5 per cent, followed by Upper Hutt, down 14.5 per cent.
REINZ chief executive Jen Baird says while first home buyers are being enticed back into the market by easing prices and less competition, most properties are still unaffordable to many, particularly in larger hubs, such as Auckland and Wellington.
“Investors remain largely absent – new tax legislation and rising interest rates have created concern amongst this buyer pool, seeing them step back. Overall, buyers remain cautious.”
The number of properties for sale across the country continued to soar in August, lifting a record 76 per cent when compared with August last year, while average prices continued falling to stand at $899,200 nationally, the Trade Me Property Price Index shows.
Property listings have now risen for nine months straight and are well above pre-pandemic levels. August was the third month in a row where listing numbers spiked by more than 50 per cent year-on-year.
Listings in every region were up by at least a third in August when compared with the same month last year, and there were some standouts. Waikato had the highest number of properties for sale ever last month, with supply more than doubling in the region when compared with August last year.
Trade Me property sales director Gavin Lloyd says while demand for property is also on the rise, it is no match for the large increase in supply.
The national average asking price was down 1 per cent in August when compared with July and is now below $900,000 for the first time since October last year.
The biggest month-on-month average asking price drops were in Wellington, down 4 per cent, and Nelson/Tasman, Taranaki, and West Coast, down 3 per cent.
“Prices are falling as a direct result of sky-high supply paired with comparatively low demand, taking the pressure off buyers and forcing sellers to lower their price expectations,” says Lloyd.
September property sales by Barfoot & Thompson were the worst for a September month since 2008.
Sales numbers were up 6.2 per cent on those for August but down 7.8 per cent on those for September last year. Slightly more than 46 per cent of the 614 sales were priced at under $1 million. For most months this year sales in the under $1 million price category have ranged between the low 30 per cent to 40 per cent of total sales. Forty-six properties were sold in excess of $2 million, the same number as last month.
The median price for the month at $1,064,000 fell away by 4.2 per cent on that for August and was the lowest it has been in any month for 16 months.
However, the average sales price at $1,164,852 was up 0.6 per cent on that for August, and 2.9 per cent ahead of the average price in September last year.
While the median price in September is down 14 per cent on the median peak price of $1,240,000, achieved in November last year, the median price in September is down only 3.3 per cent on the median price in the same month last year.
In comparison, the average September sales price is down 8.9 per cent on the peak average price of $1,278,647 achieved in December, but is 2.9 per cent higher than last September’s average price. “Prices are edging lower gradually rather than falling sharply,” says Barfoot & Thompson director Kiri Barfoot.
At the end of September the agency had 4,567 properties on the books; 1.5 per cent lower than last month but twothirds higher than the number last year.
A fall of 4.1 per cent in house values from July to the end of September ranks as one of the worst on record, CoreLogic data reveals.
It was only marginally better than the three months to the end of August 2008 when values fell 4.4 per cent, in the wake of the global financial crisis.
‘Prices are falling as a direct result of sky-high supply paired with comparatively low demand’ GAVIN LLOYD
However, CoreLogic’s House Price Index shows the average value of NZ homes dropped from $1,043,261 in March to $977,158 in September, tipping down $66,103, or 6 per cent in the six months.
The biggest drops were in Auckland and Wellington where average values in most districts declined by more than $100,000, with substantial drops of more than $50,000 also recorded in Tauranga, Napier, Hastings, Palmerston North, Masterton, Nelson and Dunedin.
The biggest wane in values occurred in some of Auckland’s most expensive districts, with the average residential property value of Auckland’s central eastern district, which includes high-priced suburbs such as St Heliers Bay and Kohimarama, dropping by $216,887.
That was followed by a weakening of $196,351 for Auckland’s gulf islands, which is essentially the Waiheke Island market.
Values in Manukau’s eastern suburbs, which includes upmarket areas such as Howick and Bucklands Beach, also suffered with the average value across the district dropping $172,219.
CoreLogic research head Nick Goodall says as interest rates have increased, and credit is harder to attain, the housing market is firmly in retreat.
The new building consent frenzy is over. Consents fell 1.6 per cent in August after rising 4.9 per cent in July and monthly numbers have been effectively flat for a year.
There were 4,547 new dwelling consents issued in August, not much different in numbers than the 4,508 consented in August last year. In the August year new consents were 50,653, up 8.9 per cent from the year ended August 2021.
MEDIUM DENSITY SWING
There is a rotation away from standalone houses and towards medium density developments, such as apartments and townhouses. Just over 1,900 standalone houses were consented, bringing the yearly total to 23,060, down 8.9 per cent compared to the previous 12 months.
Townhouses and units are gaining in popularity with 1,771 consented in August, 20,681 consented over the year, up 41.7 per cent compared to the previous 12 months.
Apartment consents are on an even keel with 408 consented in August and 4,096 for the year, compared to 4,094 in the previous 12 months.
That shift in the type of consents being issued has been centred on Auckland where population pressures have been more pronounced, and where planning restrictions have allowed for greater housing intensification, says Satish Ranchhod, Westpac senior economist.
While consents are flattening out, costs are still a significant factor. The total value of residential consents for August was $1.912 billion, up 12.9 per cent for the month and alteration work consented in August added another $249 billion, up 26.7 per cent on the same month last year. This totalled $2.161 billion, up 14.3 per cent on the previous year.
Ranchhod says, however, the construction sector is facing challenging conditions. “Buyers are increasingly hesitant to make purchases and developers are nervous about bringing new projects to market. The related pressure on margins is likely to be a key reason for the low levels of confidence in the building sector.”
WHAT’S DRIVING HOUSE PRICES?
HOUSE PRICES: DOWN
The REINZ house price index (HPI) posted its 10th consecutive monthly fall in September and house prices are 8.1 per cent lower on a year ago, the biggest annual decline since the GFC in 2009.
The Reserve Bank’s official cash rate has risen 50bps and now sits at 3.5 per cent.
INTEREST RATES: UP
ANZ, Westpac, ASB and BNZ have passed on the full 50bps OCR rise to customers on floating rates. This takes floating rates to more than 7 per cent for the first time in eight years.
BUILDING CONSENTS: DOWN
Consents fell 1.6 per cent in August after rising 4.9 per cent in July. There were 4,547 new dwelling consents issued in August to bring the annual figure to 50,653, up 8.9 per cent from the year ended August 2021.
MORTGAGE APROVALS: DOWN
Just over 15,000 mortgages were issued in August, down 36.2 per cent from August last year and a record low for an August month since 2013. The average sized mortgage fell for the third consecutive month, down 5.5 per cent to $358,263. Investors borrowed $905 million, up from $852 million in July and $1.368 billion in August last year. First home buyers were lent $1.124 billion, up from $1.021 billion in July and owner occupiers borrowed $3.320 billion, down $4.471 billion in July.
Stats NZ stock measure shows rents rose 0.3 per cent in August compared with July and were up 4 per cent for the year.
The latest figures from Statistics NZ show that 1,222 people arrived in the country on work visas in August, which is the highest number since border restrictions were introduced to combat the Covid pandemic in March 2020.