Photo: RNZ
New Real Estate Institute (REINZ) data showing a weak housing market, particularly in Auckland, is further evidence of the "air pocket" the economy hit in the middle of this year, one economist says.
REINZ has released its data for July which shows seasonally adjusted sales counts at a national level were down.
The House Price Index, which smoothes out variations in the median sale price, was up 0.1 percent year-on-year on a national basis but down 0.4 percent on the month before.
For Auckland it was down 0.1 percent year-on-year and down 1.8 percent month-on-month.
Papakura values were down 5.2 percent compared to 2024, while New Plymouth's were up 4.9 percent and Invercargill's 7.8 percent.
BNZ chief economist Mike Jones said he had been looking at the numbers to validate or disprove what looked like a "stumble" in the housing market in June.
"It looks like if anything the housing market was a little weaker again in July so it does appear that markets have lost some of that relatively modest momentum that was there and it's faltering a little bit."
He said Auckland was noticeably softer than the rest of the country, particularly the South Island.
"The unemployment figures we got last week and now the housing market as well - it just kind of adds to all those other signs and evidence we're getting in the economic numbers that the country hit something of a wobble or an air pocket in the middle part of the year."
He said the labour market had weakened and cost of living pressures had intensified. "Food prices in particular are putting extra pressure on the household budget. At the same time, as it was pointed out last week, wage growth is cooling down so in some ways it feels like the average household is sort of under siege at the moment. That's causing faltering demand across a lot of different areas of the economy and the housing market would be one."
ANZ pushes for more OCR cuts
ANZ's economists noted that house prices were now 0.4 percent above their most recent low in October 2024.
"Given recent weakness in the market, we see some downside risk to our forecast that prices will end 2025 up 2.5 percent year-on-year. We remain of the view that three further cuts in the OCR will be needed to shore up the economy and stabilise inflation around the Reserve Bank's target midpoint. Lower interest rates and a cyclical recovery are likely to see the housing market gradually strengthen over the next year, but we don't expect prices to race away."
Westpac senior economist Michael Gordon said the market was unusually well balanced.
"While lower mortgage rates have helped to spur higher levels of activity compared to a year ago, demand is being matched by an ample supply of homes hitting the market. As a result, there has been little upward pressure on sale prices.
"House sales were down 2.5 percent in seasonally adjusted terms in July, the third straight monthly decline. The number of sales is typically understated on the first release, so we expect that this will be later revised to around flat. Sales were up 4 percent on a year ago; it was around this time last year that the level of activity in the market took a marked step up, so year-on-year comparisons will look less impressive from here on."
When seasonally adjusted, the house price index was down 0.5 percent in July and down 1.2 percent in Auckland, Gordon said.
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