House price falls: ‘The rollercoaster still has a way to go’

Miriam Bell11:29, May 23 2022

House price falls: ‘The rollercoaster still has a way to go'

CoreLogic head of research Nick Goodall outlines the looming factors that could sink house prices, and how important the next election will be.

The level of housing market volatility is the highest in 30 years and that is causing the market downturn to snowball as the weakness works its way up to higher-end properties, a valuer says.

Quotable Value (QV) has just released its latest figures, showing that prices in the 25% most and least expensive homes across the main centres were down by 1.2% and 1.7% respectively over the three months to April.

“In my 30-plus years as a registered valuer, I have never seen anything quite like it before, and I am not sure if we have seen the worst of it, either. This residential property rollercoaster still has a way to go,” general manager David Nagel said.

The average price across the main centres fell by 1% which left it at $1.03 million.

It was the first time since the end of the 2020 national lockdown that the upper end of the market had recorded no price increase at all and longer since it had posted a decline, but the lower end had posted its first fall in over two years last month, according to QV.

While seven of the 10 biggest declines in prices in different centres were at the lower end of the market, three were at the upper end of their particular markets.

Prices on upper end properties in Lower Hutt, Upper Hutt and Palmerston North were down by 8.2%, 6.3% and 4.6% to average prices of $1.39m, $1.23m and $1.07m respectively. In Auckland City, upper end prices dropped 3.4%.

House prices in the upper end of the Upper Hutt market dropped by 6.3% over the three months to April.

But, aside from Lower Hutt, the biggest price falls were for lower-end properties in Papakura, Dunedin and Porirua where they were down by 10.8%, 8.1%, and 7.4% to $780,203, $440,708 and $689,740.

In the Auckland region, Manukau’s lower-end prices dropped the most. They were down 6.5% to an average of $780,192.

Nagel said that what began as a reduction at the more affordable end of the market was now beginning to affect prices much further up the property ladder.

“What we are seeing now is a growing number of main centres experiencing declining prices at both ends of the market. Those losses are starting to mount, month to month, up and down the property ladder.”

The first four months of this year could not be much more different to the last four months of last year, he said.

That was because last year none of the main centres had any negative price movement at all, but now most of them did and the few exceptions, such as Whangārei, Christchurch and Invercargill, were likely to join them in the coming months.


The housing market may be down but its not out

By Miriam Bell  Published: 05:00, May 22 2022

Warnings that house prices could fall by 20% from their peaks are disturbing, but experts say the state of the market is not as dire as it sounds.

The market has been easing for some time, and the latest Real Estate Institute figures show the number of houses sold in April was down almost 30% compared to March while the national median price dropped 1.7% to $875,000 over the same period.

Price falls since the peak of the market are larger, according to the institute’s house price index. It has the national median down 6.2% since November, and Auckland and Wellington’s prices down from their peaks by 10.2% and 10.4% respectively.

But ASB and Westpac have now predicted prices could drop 20% from their peaks, when adjusted for inflation. That would be the biggest fall since the 1970s when they decreased by about 40% between 1975 and 1980.

That sounds scary, but as many experts have pointed out it would still only return prices to where they were early last year. So what do falling prices, along with more muted sales activity, mean for the market, and for buyers?

CoreLogic chief property economist Kelvin Davidson says the inflation-adjusted price falls being suggested are plausible, and steeper than in the global financial crisis (GFC) when they dropped around 15%.

Prices rose faster and over a shorter period over the last two years than they did over the pre-GFC period, and that highlighted their rapid decline this year, he says.

“That is reflected in a real change of mood and pace in the market, with listings up and buyers taking their time because they have more choice which gives them more pricing power.

CHRIS MCKEEN/STUFF

Auckland’s house prices have fallen 10.2% since their peak in November.

“But it doesn’t seem there is a huge wave of sellers desperate to sell. Unemployment remains incredibly low and, although interest rates have gone up considerably, people’s serviceability has been tested.”

People who bought late last year with a minimal deposit and stretched themselves in terms of loan relative to income were more vulnerable, he says.

But most homeowners would not be in a situation where they were facing negative equity, although they face higher loan repayments when they refinance. And in the first quarter of this year there were just six mortgagee sales, compared to a peak of 777 in 2009.

While there may be a lag before distressed sales increased, there are more buffers in place than there were in the GFC period, Davidson says. These include loan-to-value ratios, tougher serviceability criteria, a strong labour market, and greater bank willingness to avoid mortgagee sales.


A larger correction remains a possibility says Reserve Bank of falling house prices

John Anthony Published: 13:35, May 04 2022

A larger correction remains a possibility says Reserve Bank of falling house prices PETER MEECHAM/STUFF

House prices have been declining since November, but still remain elevated above their sustainable level, the Reserve Bank says.

Property investor Matthew Ryan provides his predictions for the housing market as prices fall and auction clearance rates drop.

Recent borrowers are most exposed to rising interest rates and declining house prices, as a larger correction in the property market remains a possibility, the Reserve Bank says in its latest financial stability report.

The half yearly report, which covers matters relating to the soundness and efficiency of the financial system, said New Zealand’s financial system was well-placed to support the economy and remained “robust” in the context of significant global economic challenges, but recent developments meant the near-term risks to the financial system had increased.

Key challenges facing the economy include rising interest rates and inflation, house prices above sustainable levels despite recent declines, the ongoing effects of the pandemic and Russia’s invasion of Ukraine, it said.

The report said while a gradual adjustment to a more sustainable level of house prices was desirable for the stability of the financial system, “a larger correction remains a possibility”.

“While a gradual decline in house prices to more sustainable levels is desirable from a financial stability perspective, a sharp correction remains a plausible outcome that would have broad economic implications.”

Recent buyers with limited equity were particularly vulnerable to house price declines, and a large fall in house prices would significantly reduce housing wealth and could lead to a contraction in consumer spending, it said.

“Some recent mortgage borrowers could face difficulty servicing their debts as interest rates rise alongside higher living costs.”

Banks’ capital positions have increased over the past two years ahead of upcoming higher capital requirements, strengthening the banking sector’s ability to absorb losses and maintain lending in the event of a downturn, it said.


Weak sales and prices prove housing market slowdown is here

By Miriam Bell Published: 09:11, Apr 27 2022

House Prices FallBanks, like any business, want to charge as much as they can. This is what that means for your interest rates.

New Zealand has a buyers’ market sooner than expected, with house sales volumes at the weakest they have been in a decade, CoreLogic says.

The property research company’s latest quarterly market update confirmed sales began to show hints of a slowdown in the middle of last year, but the trend extended into the first quarter of this year.

CoreLogic chief property economist Kelvin Davidson said it would be necessary to go back about a decade to find softer sales results for any given January, February or March.

While Omicron might have stalled housing turnover temporarily, the key drivers for the sales slowdown were fundamental and longer-lasting, he said.

Sales in the first part of this year were the weakest they have been in a decade.

“Higher mortgage rates and reduced credit availability is having a significant impact on sales, and we expect market activity will continue to be subdued.

“Sales volumes could decline by as much as 10% this year, and another 5% or so in 2023. But this is best characterised as a slowdown though, rather than a serious downturn.”

The fall in sales had also contributed to the increase in the number of listings available on the market, and that had reduced buyer anxiety that they might not find their ideal property, he said.

“The big picture is we’ve probably shifted into a ‘buyer’s market’ already in many parts of the country, sooner than what might have been anticipated.

“With buyers now feeling they have the upper hand when it comes to offers, it’s no surprise to see that price pressures have faded away too.”

CoreLogic’s House Price Index showed a slowdown, while the median price figures from its automated valuations model showed around one in every six suburbs nationwide experienced a fall of at least 1% in the three months to February.


Auckland City median house price falls 19 per cent since peak in November

Geraden Cann, Mar 21 2022

The median house price in Auckland City has fallen by nearly a fifth since peaking in November, according to data from the Real Estate Institute.

The institute’s (Reinz) data shows the median price of residential properties in the city fell from about $1.54 million in November to $1.25m in February.

The fall was also noted by property data firm CoreLogic, which also recorded a 19 per cent median sale price drop between the December quarter and the year to date.​

CoreLogic head of research Nick Goodall said the drop was in part due to a rise in the proportion of flats and apartments selling, and a fall in the number of freestanding homes sold, which was probably driven by house owners’ price expectations being too high.​

Goodall said flats (which included townhouses and terraced housing) and apartments (units within larger complexes) had traditionally been cheaper, resulting in owners’ expectations being more in-line with the falling market.

The owners of traditional houses that managed to sell were probably the ones accepting lower prices, Goodall said.

He said these probably included motivated sellers who had already bought another property and investors who would accept prices below what they would have been three months ago, given the capital gain was still large.

Goodall said first home buyers should be encouraged by falling median sale prices.​

“It does show an adjustment in the market where lower prices are being achieved,” he said.

Goodall said traditionally Auckland led price trends that later played out around the country. But that did not mean it would this time.

“It may be showing vulnerability sooner than some areas this time due to the higher average value and the fact that the current slowdown is driven by tightening credit conditions which affect the amount people can borrow,” he said.

This is interesting as Northland normally follows Auckland within a few months.


New Zealand property market: Asking prices plummet in some parts as more houses available

March 2022

More houses available to buy and a monthly drop in the national average asking price are hints the property market is cooling, latest real estate data shows.

Releasing its February report on Wednesday, property listings website realestate.co.nz confirms nationwide property listings, at 11,545 are up 7.5 percent year-on-year, marking a return to February 2018 levels.

National housing stock (a snapshot of properties available to buy at the end of the month), is up almost 50 percent year-on-year, at 23,270.

At $993,741, the national average asking price for properties dropped 0.5 percent in February – the first monthly fall in five months. 

Realestate.co.nz spokesperson Vanessa Williams said new listings and stock numbers are starting to reflect 2018 and 2019 levels, before the COVID-19 pandemic.

“There were just 15,829 total homes available for sale around the country in February last year – that means Kiwis had 7,441 fewer homes to choose from a year ago, which is significant when you consider our population is now over 5 million,” Williams said.

“The increasing numbers suggest that we might be moving back towards pre-COVID-19 levels, and this will be welcome news for property-seekers.”

In what realestate.co.nz says is a hint the property market might be cooling, in February compared to January, average asking prices dropped in 11 out of 19 regions.

“While it is too early to call this a trend, if vendors are asking less for their properties in February than they did in January, it could suggest a market slowdown is on the way,” Williams said.

Average asking prices drop in 11 regions

The average asking price in Auckland dipped 1.3 percent month-on-month, to $1.26m.

Average asking prices also fell in Waikato, the central North Island, Hawke’s Bay, Gisborne, Nelson & Bays, Coromandel, Wairarapa, Wellington, Otago and Southland.

At 6.2 percent, the biggest monthly fall was in the central North Island, where the average asking price was $813,480.


Happy New Year 2022

NEW ZEALAND PROPERTY REPORT

More choice for buyers in 2022, with nearly 30% more homes on the market

Ashley Harder  11th Jan 2022

The latest data from realestate.co.nz suggests that national housing stock (the total number of homes available for Kiwis to purchase across the country) has gone up by nearly 30% since December 2020—an increase of about 4,000 properties.

Vanessa Williams, spokesperson for realestate.co.nz suggests that this data confirms an earlier theory—that the market is becoming more palatable for property seekers. “Buyers across the country have more choice coming into 2022. This could mean less FOMO (fear of missing out) and perhaps even more properties hitting the market,” said Vanessa. “If sellers are confident that they’ll be able to purchase after they sell, we could see this number continue to climb.”

Four regions saw their housing stock more than double year-on-year—Wellington (up 206.6%), Manawatu/Whanganui (up 133.7%), Wairarapa (up 111.8%) and Hawke’s Bay (up 107.4%). Other regions, including Otago (up 54.4%), the Bay of Plenty (up 45.3%), Waikato (up 45.2%) and Southland (up 32.5%) saw notable stock increases.

“It’s heartening to see more housing availability coming into 2022. It looks like there’s an exciting summer ahead for buyers and sellers alike.”

Nine regions hit record-high average asking prices

The national average asking price hit a 14-year record high in December; up 23.4% to $985,245 when compared to December 2020. Nine regions led—Hawke’s Bay (up 36.9% to $865,209), Wairarapa (up 30.1% to $827,766), Bay of Plenty (up 29.1% to $999,978), Central North Island (up 28.8% to $825,617), Canterbury (up 27.6% to $674,222) Manawatu/Whanganui (up 27.2% to $671,958), Otago (up 20.0% to $652,839), Taranaki (up 19.6% to $617,466) and Central Otago / Lakes District (up 19.1% to $1,398,407) all hit 14-year record high average asking prices year-on-year.

“Typically, more stock would result in cooling prices because buyers have more choice, but we haven’t seen that happen yet,” said Vanessa. “If stock continues its upward trend into 2022, it’ll be fascinating to watch the impact on asking prices.”

Central Otago / Lakes District, now nearing a $1.4 million average asking price, holds a firm grip on its reign as the most expensive region to purchase a property in the country. Auckland (up 18.5% to $1,225,265) and the Coromandel (up 25.2% to $1,110,512) follow in second and third place respectively.

Green shoots of new listings spring up across the country

Although December is often a quiet month, when compared to 2020, new listings on realestate.co.nz saw a 5.6% increase. “December is usually a “short” month for the property market—Kiwis are winding down for the holidays, so we usually only see activity to the middle of the month,” said Vanessa. “But with significant restrictions still in place in December, it was heartening to see vendors active right up until the festive break.”

In fact, several regions saw new listings increase year-on-year. Most notably, Wairarapa (up 25.7%), Manawatu/Whanganui (up 22.8%), Hawke’s Bay (up 18.6%) and Southland (up 18.2%), while others, including Gisborne (down -34.9%), the West Coast (down -18.6%) and the Coromandel (down -18.4%) saw new listings decrease year-on-year.

New listings in each region were very mixed last month—some regions saw significant increases year-on-year, while others seemed to quiet down for the holidays—resulting in a moderate increase in new listings nationally,” said Vanessa.

How to spot a buyer’s market

New Zealand has been in a bona fide seller’s market for about a decade, and the country is a good distance away from anything that looks like a buyer’s market. But there have been several recent reports from experts that predict a range of outcomes for the housing market, including a dip in prices and even a “correction” that would result in a buyer’s market.

But how do we spot a buyer’s market? realestate.co.nz measures this regularly through our inventory of listings to monitor market sentiment.

“We use sales data from the Real Estate Institute of New Zealand and our own stock data to find the inventory clearance rate and compare it to our long-term average.”

“This gives us a good indication of how each region is tracking—for example, Wellington’s current inventory clearance rate is nine weeks, but the long-term average is 15 weeks. Because December’s clearance rate is lower than the long-term average, this indicates a seller’s market,” says Vanessa.

“This measurement is a reliable indication of market sentiment.”

Property Report January 2022


Seasons Greetings and Property Forecast 2022 and Beyond

That time of year is upon us once more where we can spend time with family and friends around Christmas and New Year celebrations.

We have included in this email a recent survey poll report of market analysts who have been brave enough to state their views on what our property market might be like over the next couple of years.

Team Davis Seasons Greetings to all

New Zealand House Prices to Calm Next Year Before Fall

A forecast report from Property Market Analysts

“House price inflation in New Zealand will ease substantially next year, followed by outright price falls in 2023, but affordability is set to worsen in one of the world’s most expensive property markets, a Reuters poll found.

Historic amounts of stimulus to mitigate the pandemic-induced economic recession have helped New Zealand’s economy recover strongly, but have lit a fire under house prices.

They are expected to rise 25 percent this year, having already doubled in the last seven, making New Zealand’s property market one of the least affordable in the world.

That has increased public scrutiny of the Reserve Bank of New Zealand, whose ultra-easy monetary policy has been blamed for the current property market boom.

Even measures introduced by the government have so far failed to cool the market, leaving new homeowners with ever-larger amounts of debt.

“House price rises remain insanely high, with housing market pressures still going berserk. The goal posts are moving further and further away from many potential homeowners,” said Brad Olsen, senior economist at Infometrics in Wellington.

Home price increases were forecast to slow dramatically to 4.0 percent in 2022, a Reuters poll of 10 property market analysts taken Nov. 18-25 showed.

But further tightening from the RBNZ next year is expected to end the house price boom, leading to a 2.5 percent fall in 2023, according to the poll.

“FOMO (fear of missing out) is a common characterisation at the moment of the housing market’s ‘animal spirits’,” said Sharon Zollner, chief economist at ANZ.

“Looking through the noise, we are convinced we are now past the peak of the current inflation cycle, but the pace of moderation from here remains very uncertain.”

The housing crisis and the economic impact of COVID-19 have led to increased homelessness and fuelled inequality.

That poses a challenge to the Labour Party-led government of Prime Minister Jacinda Ardern, who came to power in 2017 promising an end to the free run of property investors and the building of more affordable homes.

All but two respondents who answered an additional question said affordability would worsen over the next two to three years.

“For every step forward potential buyers take, the finish line advances 10 steps further away… affordability is unlikely to materially improve in the next few years, but might soon stop worsening quite so fast,” said Infometrics’ Olsen.

When asked what will have the biggest impact on house prices next year, all but one of seven property market analysts said higher interest rates or tighter monetary policy.

Six analysts who answered a follow-up question on how many basis points interest rates would have to rise by to significantly slow housing market activity gave a median forecast of 200, with predictions in a range of 75-300.

“New Zealand households are highly leveraged so it won’t take much of an increase in interest rates to slow house prices significantly, particularly with macroprudential measures also being tightened,” said Justin Fabo, senior economist at Macquarie.”

Well whatever 2022 brings we wish you and your family a great holiday season and our very best wishes for a happy and prosperous New Year.

Happy Summer Holidays from Team Davis