20 Apr 2023

End to housing market downturn may be in sight - CoreLogic NZ

10:40 am on 20 April 2023
Houses around Lyttelton area in Christchurch

CoreLogic NZ Chief Property Economist Kelvin Davidson says while house prices continued to fall last month, there are signs the property market is beginning to stabilise. Photo: RNZ / Nate McKinnon

The stabilisation of mortgage interest rates is among several indicators signalling a possible end to the country's extended property downturn.

CoreLogic NZ's monthly update on the country's residential housing market pointed to green shoots beginning to emerge among key market metrics, such as listing numbers, sales volumes and an easing in price falls.

While house prices continued to fall last month, amid subdued property activity levels, the market fundamentals were not as weak as they had been, according to CoreLogic NZ chief property economist Kelvin Davidson.

Davidson did not rule out further price falls in the short-term, but said there was little movement among banks and lenders to pass on the most recent 50-basis-point increase in the official cash rate (OCR) to 5.25 percent.

Average property values fell 2.4 percent in the March quarter, taking the annual decline to 10.5 percent, which surpassed the worst point of the Global Financial Crisis.

Sellers meeting the market

Data from realestate.co.nz and the Real Estate Institute indicated sellers were being realistic about asking prices, with the gap between the national average asking price and median selling price remaining fairly constant at 5.7 percent over the past 16 years.

"What this means is, for the most part, real estate agents and vendors are setting a price when they list a home that is realistic to what the property sells for," Realestate.co.nz chief executive Sarah Wood said.

"Asking prices have followed an almost identical trendline to selling prices nationally and in all regions since realestate.co.nz records began," she said.

Fewer properties for sale

However, CoreLogic's data indicated more sellers were holding out for better prices.

Sales volumes in the 12 months to March were 31 percent down on the year earlier.

There were 7680 new listings over the four weeks ending 9 April compared to 10,907 for the same period in 2022.

Total housing stock on the market was 36,172, which was well above the five-year average of 30,803.

"Value trends remain weakest in the North Island, with parts of Canterbury and the West Coast still recording some modest increases," Davidson said.

"Yet there were also hints in the sales data for March that the worst may now have passed for activity, and with new listings flows each week still very low, the total stock of property available for sale on the market is now just showing the first signs of tightening a little."

Light at the end of the tunnel

CoreLogic's data indicated about half of existing mortgages by value were currently fixed, but due to reprice onto a generally higher mortgage rate over the next 12 months.

"Any suggestion that interest rates have topped out will provide buyers and sellers with more confidence and is eventually likely to result in a turnaround in housing sentiment," Davidson said.

"When you also consider continued high employment levels - and employers wanting to retain current staff at all costs - rising net migration, and the possibility that some investors could start to return to the market as they try to pre-empt debt to income ratio caps next year, there's a growing sense that the market's downturn could end in the second half of 2023.

"Of course, uncertainty remains high. But there does now seem to be light at the end of the tunnel."

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