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Market Finds Its Footing At Last

Average home values are edging up as things look brighter across the country, Sally Lindsay reports.

By: Sally Lindsay

2 December 2023


Auckland building consents were down 22 per cent over the past year.

Median sale prices are a mixed bag across the country, with the national median sale price staying at $795,000, the latest REINZ data show.

Year-on-year, there is a slight national decline of 2.8 per cent, while 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 (+2.0 per cent), West Coast (+2.6 per cent), Canterbury (+3.2 per cent), and Southland (+2.4 per cent). There has been a drop in median sales prices across all other regions year-on-year this month.

Sales have been steady month-on-month, with a small 2.5 per cent drop from 5,762 to 5,619, and an 8 per cent increase from 5,205 to 5,619 compared to October 2022. For New Zealand, excluding Auckland, the total number of properties sold has followed a similar pattern, dropping 2.2 per cent month-on-month and increasing 2.6 per cent year-on-year from 3,573 to 3,665.

Across the regions, 12 out of the 16 had an increase in the number of properties sold year-on-year, with Northland at +36.1 per cent, and Southland at +29.6 per cent the biggest increases.

Days to sell has declined year-on-year by three days for New Zealand to 37, and by two days for New Zealand (excluding Auckland) to 39. Days to sell across the country fell by seven days compared to October last year.

The House Price Index stood at 3,652 last month, showing a 1.1 per cent increase compared to the previous month. However, when compared to the same period last year, the HPI reflects a 2.5 per cent decline. The average annual growth in the HPI over the past five years has been 5.8 per cent, per annum. It remains 14.6 per cent below the peak of the market in 2021.

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.”

Average residential property values have lifted $18,000 over the three months to October as the housing market finds its footing after a slump over the past two years, QV’s latest House Price Index shows.

The average home value increased 2.1 per cent over the three months – an improvement on the 0.9 per cent quarterly home value increase shown at the end of September – with the national average now sitting at $907,387.

Just three of the 16 main urban centres QV monitors had a fall in average home values – Whangarei (-0.4 per cent), Hamilton (-0.2 per cent) and New Plymouth (-2.8 per cent) – with New Zealand’s biggest cities experiencing some of the largest gains. The average home value increased 2.7 per cent in Auckland, 2.5 per cent in Wellington, and 1.8 per cent in Christchurch.

QV operations manager James Wilson says the housing market is increasingly showing signs of recovery in the context of a low level of sales activity and challenging economic conditions. “Interest rates and credit constraints continue to act as a handbrake; for the most part there are increasing signs of life across much of the country.”

While the property market’s recovery has largely been fuelled by first-home buyers, Wilson says the recovery is spreading into the largest urban areas, up the property ladder and into some of the higher value brackets. “Though most people remain cautious – and rightfully so given economic conditions – we are beginning to see that mindset shift a little.”

He reiterated the market will likely remain “flat to gently rising” for the foreseeable future. “I still don’t expect to see a big rebound in house prices given the strength of the economic headwinds we’re facing. But considering what we’ve all been through since Covid first made its way to these shores, flat is probably the best thing given the current conditions.”

Wilson says it will be interesting to see whether some investors might become more active, especially now there’s certainty around a change in government. This, he says, could increase the competitive pressure on house prices in more affordable areas and places where record migration is driving rapid population growth, but it’s still unlikely “we’ll see a major return of investors while high interest rates and credit constraints remain.”

Record Migration

Migration into NZ is at record levels, just when housing consents are falling off a cliff.

About 199,500 non-NZ citizens immigrated over the past 12 months and the net gain was 110,200 once those leaving have been accounted for. That is more people than live in Palmerston North or New Plymouth when not enough houses are being consented or built to keep pace.

Residential building consents dropped 5 per cent in September to levels below those before the pandemic. Over the past 12 months, just over 40,000 new dwellings were consented, down 20 per cent on the previous year. The fall in consent numbers has been widespread, including Auckland, down 22 per cent over the past year; Wellington, down 18 per cent; and Canterbury, down 17 per cent.

The extra demand for housing is putting upwards pressure on house prices and rents, especially in Auckland. Almost half recent migrants have come from India (38,197), the Philippines (30,350) and China (19,876), which is well above their usual percentages of our migrant pool. Historically, migrants from these countries have earned slightly below average wages in NZ.

Goodbye Slump

CoreLogic’s latest national House Price Index shows the national downturn is officially over with a total peak to trough decline of about $138,000, or 13.2 per cent, from the record highs of late 2021.

Auckland was one of the hardest hit in the slump, with prices falling $261,000, or 17 per cent, since the 2021 record prices. The city’s average value is now $1.26 million after a 0.2 per cent rise last month.

Wellington was next in the queue, with the average value falling $245,000, or 22 per cent, during the slump – the biggest hit in the country. The average value is now $893,417 after a 0.3 per cent rise in October. Tauranga is the only one of the six main centres to continue falling. Last month prices slowed a further 0.1 per cent for an average value of $1 million. Hamilton’s average fell $121,000, or 13 per cent, during the downturn, while Christchurch’s average value fell $50,000 or 6 per cent – one of the lowest – and Dunedin fell 15 per cent or $104,000.

However, nationally at just short of $909,000 in October, average values are still almost 25 per cent above the pre-Covid levels of March 2020.

With values now in an upturn, the major banks are predicting prices will increase between 6 and 10 per cent next year. CoreLogic chief property economist Kelvin Davidson says around the main centres signs of the emerging upturn were pretty widespread last month.

Values in Hamilton and Christchurch rose by more than 1 per cent, Dunedin by 0.8 per cent, and Wellington and Auckland also saw rises over the month. Tauranga was virtually flat. “The key fundamentals for house prices have been looking stronger for a reasonable period. October’s data has brought that first increase at the national level, but it’s early days and there’s still a lot of diversity in market conditions across the country,” Davidson says.

Shackles Loosened

Median and average sales prices topped $1 million for the first time since March as Auckland’s property market recovers, Barfoot & Thompson’s October data shows.

The city’s biggest residential agency says the shackles of rising interest rates and economic uncertainty that have held back prices were loosened with the median price hitting $1,011,250. This is the highest median price in the past seven months and was up 2.5 per cent on that for September and 1.8 per cent higher than the average for the past three months.

The average price, at $1,090,724, was the highest in the past four months and is up 3 per cent on September. A feature of last month’s sales was the level of interest shown in housing in the $1 million to $2 million bracket. While always the segment with the largest number of sales, in October it accounted for 54 per cent of all sales, the first time this year this price category has accounted for more than half of all sales.

“Sales in the $1 million to $2 million price category are particularly sensitive to mortgage repayment levels and show that those taking on debt at current interest rates are confident that from now on prices are only likely to rise.”

Sales at more than $2 million represented 6.6 per cent of all sales.

Growth was modest, but it was across the board, with a high number of new listings and sales numbers increasing.

Barfoot & Thompson’s managing director, Peter Thompson, says sellers returned to the market in strength, with new listings for the month at 1,829, a quarter higher than in September, and a third higher than for the same month last year. “Buyers were also prepared to commit, and sales at 846 were the highest for an October for three years, and a third higher than in the same month last year,” he says.

Higher Rents

Record migration has had an impact. Rents in Northland, Marlborough and Auckland have skyrocketed in the past year, up between 10-14 per cent, Trade Me’s September Rental Price Index shows.

Northland had the biggest increase, up $75 a week or 14.9 per cent, lifting from $505 to $580 in the past 12 months, followed by Marlborough, up 14 per cent from $500 in September last year to $570 now. Auckland is up 12 per cent since last year with a median weekly rent of $670.

The median rent held steady at $620 per week nationwide since June this year. Those renting are still spending significantly more year-on-year, however, with the national median rent up $45 from $575 per week last year. “That’s a fairly significant increase in weekly expenses – adding up to $2,340 in a year,” says Gavin Lloyd, Trade Me’s property sales director.

While rental prices are relatively stable across the nation, Auckland rental properties are still reaching record highs – with Auckland three to four-bedroom rentals reaching a new record median weekly rent of $770.

Properties in Auckland city have been holding steady at $650 per week since April, which is appealing for those wanting to live closer in to save money on other expenses, such as travel, Lloyd says.

The North Shore is the most expensive Auckland district to rent with weekly median rent at $710, followed by Papakura at $700.

Aucklanders are paying 11.8 per cent more to rent an apartment, 10 per cent more for a unit and 4.4 per cent more for a townhouse compared to the same time last year. Trade Me listings were down 16 per cent year-on-year in September, while enquiries were up 11 per cent.

The biggest gap between supply and demand is in the Auckland region, with listings in September down 26 per cent, while enquiries are up 28 per cent. Meanwhile, the average weekly rent paid across all Barfoot & Thompson’s 17,000 Auckland managed rentals slid up to $652.19 in September, up 4.44 per cent, or $27.74 a week, over the same time last year. Most of the big increase was in new tenancies, rather than existing rentals. It marks the first time in five years the percentage increase was above 4 per cent after two years of rises ranging between 2.97 and 3.37 per cent year-on-year.

The agency’s property management general manager, Samantha Arnold, says there were several factors behind the lift. “People are returning to the city central, which coupled with constrained supply, fed into the increases. The city’s apartment market had an 8.43 per cent, or $43.18 per week, rise in the quarter. It’s a significant shift after almost flatlining through 2020, 2021 and much of 2022.”

House Prices: Steady At $$795,000, The National Median House Price Is Virtually The Same As Last Month And For Much Of This Year. The Latest Reinz Data Show A Slight Decline Nationally 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 (+2.0 Per Cent), West Coast (+2.6 Per Cent), Canterbury (+3.2 Per Cent), And Southland (+2.4 Per Cent). There Has Been A Drop In Median Sales Prices Across All Other Regions Year-On-Year This Month.

OCR: Steady The Reserve Bank’s Official Cash Rate Has Been Held At 5.5 Per Cent Since July After The Rbnz Indicated It Was At The End Of Its Tightening Cycle, Although A Couple Of Bank Economists Believe It Might Rise Again At The Bank’s February Meeting.

Interest Rates: Up Bnz Has Lifted Its One And Two-Year Rates To 7.35 Per Cent And 7.05 Per Cent Respectively For Its Special Rates And For Those That Don’t Qualify The Rates Are 7.95 Per Cent And 7.65 Per Cent. Across All Major Banks Standard Two-Year Rates Are Now Well Over 7 Per Cent, With Kiwibank’s At 8.05 Per Cent. Floating Can Go As High As 9.44 Per Cent. Westpac Economist Darren Gibbs Says There Is Value In Fixing Mortgage Rates For Up To Three Years, With Interest Rate Cuts Some Time Away.

Building Consents: Down The Number Of New Homes Consented In September Was Down 20 Per Cent Compared To September Last Year. Across The Board, 40,408 New Dwellings Of All Types Were Consented For The Year To September And In The Month There Were Consents Issued For 2,898 New Homes Comprising 1,404 Townhouses, Flats, And Units, 1,200 Standalone Houses, 204 Apartments And 90 Retirement Village Units.

Mortgage Approvals: Down September’s New Mortgage Commitments Were $5.2 Billion, Down 10.2 Per Cent From $5.8 Billion In August But Up 1.2 Per Cent On An Annual Basis. This Is The Second Month This Year To Record An Annual Increase Since September 2021. The Share Of New Mortgages To First Home Buyers Rose To 24.1 Per Cent To $1,253 Billion In September, Up From 23.7 Per Cent In August And Up From 20.7 Per Cent In September Last Year, While Lending To Investors Rose Slightly, Up 17.2 Per Cent To $894 Billion, Up From 17.1 Per Cent In August. The Share Of Mortgages To First Home Buyers Has Exceeded The Share To Investors Each Month Since April 2022. The Share To Other Owner-Occupiers Was Down To 57.1 Per Cent In September To $2,965 Billion, From 57.8 Per Cent In August And Down From 62.5 Per Cent A Year Ago. The Average Value Of New Mortgages Across All Borrower Types Fell To $347,000, Down From $362,500 In August.

Rents: Static Stats Nz Stock Measure Shows Rents Rose 0.4 Per Cent In October Compared To 0.3 Per Cent In September And Were Up 4.2 Per Cent For The Year.

Immigration: Up Migration Into New Zealand Is At Record Levels Just When Housing Consents Are Falling Off A Cliff. About 199,500 Non-New Zealand Citizens Immigrated To New Zealand Over The Past 12 Months And The Net Gain Was 119,200 In The Year To September.

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