3 May 2023

Property prices still falling but rate of decline easing

5:58 am on 3 May 2023
Christchurch based housing

CoreLogic's chief property economist says property values were still about $200,000 higher than pre-Covid levels. Photo: RNZ / Nate McKinnon

Property prices are continuing their downward slump, but the rate of decline is easing, suggesting they could soon hit a near-term floor.

The latest monthly report from CoreLogic NZ showed average home values dropped another 0.6 percent in April, to be 10.3 percent lower than the same month last year and $115,000 below their March 2022 peak.

CoreLogic NZ chief property economist Kelvin Davidson said values were still approximately $200,000 higher than the pre-Covid levels.

"The slowdown in the rate of decline could be signalling a near-term floor for house prices, which would be consistent with some shifting trends in key drivers," he said in a statement.

"The generalised peak for mortgage rates could start to increase buyers' confidence in the coming months, while employment remains high, alongside a slight decline in available listings, and rising net migration."

Davidson said it was still a challenging market for borrowers, with interest rates to remain high for much of the year.

"Of course, should New Zealand fall into a recession there will be an alternative impact on the housing market and we can't ignore the prospect of negative equity either.

"CoreLogic's latest valuation estimates for individual properties shows approximately 2500 recent first home buyers could owe more than the value of their property.

"Buyers in Auckland and Wellington make up the bulk of those properties."

Among the main centres, Hamilton and Tauranga recorded the biggest falls in average values in April, at 1.2 percent, but Auckland showed a smaller decline, while Christchurch, Dunedin, and Wellington were not far off a flat month for prices.

Davidson said over the year Wellington house prices had fallen by 18.8 percent, whereas Christchurch had fallen by a far smaller 3.6 percent.

Once housing prices hit rock-bottom, they could stay flat for some months, Davidson said.

"History tells us that if the downturn comes to an end and gives way to a flat patch, that flat patch could last for a period of time, and it could last right throughout 2024 and maybe into 2025."

Davidson said house prices stayed flat for a couple of years after the 2008 Global Financial Crisis before picking up again.

"I think we're looking at a medium term outlook that's a lot quieter than what it's been, in the first two or three years post-Covid."

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