Painful housing market keeps rolling on

The national average value now sits at $956,592 - 9.2% lower than at the start of this year.

This marks nine straight months of declining home values and there is no end in sight.

ASB economists don’t see the market improving any time soon, either. The bank has upped its prediction of prices falls from 12% to 15% from peak to trough. When adjusted for inflation this is a fall of 24%.

The bank’s economists say the  gradual falls over the past nine months contrast dramatically with the speed and magnitude of the previous boom – prices are still up nearly 30% on where they were at the beginning of 2020. They do not expect to see a trough until the first half of next year.

Even a fall of 15% is a “relatively orderly” decline and will still leave prices higher than the were at the start of 2020, say the economists.

“Broader structural factors underpinning the market don’t show much sign of a rapid turnaround. We continue to expect low levels of net migration over the coming years, with the housing shortage much less acute than it once was. We also expect the recent easing in credit conditions to prove short-lived, with mortgage rates set to head higher once again and higher bank stress-testing thresholds unlikely to help.”

QV’s latest House Price Index (HPI) shows home values nationwide slipped by an average of 2.1% in the 12 months to the end of September.

The average home dropped in value by 5.4% nationally in the three months to the end of September, just 0.1% better than the rate of quarterly decline at the end of August.

QV general manager David Nagel says the market correction is painful and the Reserve Bank’s decision to raise the OCR to 3.5% "all but ensures the path we're on will continue for the foreseeable future.

"Interest rate rises, credit constraints, the increasing cost of living – it's a sure-fire recipe for declining home values," he says.

"Plus there are still new houses coming onto the market up and down the country, putting further downward pressure on prices almost everywhere."

Nagel says the downward trend will be worrying news for people looking to sell their homes, as well as those who bought at the peak of the market and now concerned about negative equity.

"The exceptional house price increases throughout 2020 and 2021 have impacted affordability and impeded access to the property market for most New Zealanders,” he says.

Across the main centres, Queenstown "once again stands alone" with 0.2% in quarterly home value growth. The other main centres continue to "succumb to tight credit conditions and rising interest rates".

Auckland

In the country's largest city, home values dropped by an average 2.4% in the 12 months to the end of September. This is down on the 1.1% in the previous HPI. There has been eight straight months of negative home value growth, with an average of 5.8% over the past three months. The average home value is now sitting at $1,358,710.

Hamilton

Hamilton slipped into negative annual home value growth for the first time in a decade. The city's average home value dropped by 2.4% in the 12 months to the end of September, including a 2.5% drop in the most recent quarter. It is the first time since August 2011 the HPI has shown an average decline in home value over a year-long period. Hamilton's average home value is now $841,089.

Tauranga

Tauranga also recorded negative annual growth for the first time since September 2011, with home values dropping an average of 1% in the 12 months to end of September . There was also a 7.7% loss in the most recent quarter. The city's average home value is now $1,078,431 – well above the national average home value of $956,592.

Wellington

In the capital, home values fell by an average of 3.1% last month. Quarterly, the rate of decline is at 9.6%.The region's annual rate of negative home value growth is now at 14.2%. The average home value at $903,259 is now 16.9% lower than at the start of the year.

Christchurch

The average home value in Christchurch dropped by 0.6% last month, marking five straight months of negative growth. The average home value is now $764,150. However, QV says the city's residential housing market continues to demonstrate a greater degree of resilience than Auckland or Wellington, with its "rosy" annual rate of home value growth of 8.8%.

Dunedin

In Dunedin, the average rate of home value decline slowed last month. It reduced by 4.6% this quarter and 0.7% in September. This is an improvement on respective losses of 6.7% and 1.4% last month. The average drop for the year to date is now 11%. The average home value is now $646,228.