House Prices

Downturn slowly running out

The bottom of the housing market beckons, with the nation’s three-month rolling rate of decline dropping for the fourth straight month.

Tuesday, August 08th 2023

The QV House Price Index for July shows the average home dropped in value by 1.5% nationally over the July quarter, which is a smaller rate of decline than the 1.8% in June, and considerably lower than the 3.5% and 3.4% quarterly declines in April and May respectively. The national average now sits at $888,999.

That figure is now 10.2% less than the same time last year, but just 0.3% lower than at the end of June. Nationwide four of the 16 main urban areas QV monitors had growth in the quarter – Hamilton (0.1%), New Plymouth (0.4%), Christchurch (0.8%), and Invercargill (0.8%).

Home values continue to fall in Auckland (-1.5%) and Wellington (-1.7%), with the average rate of decline increasing in Nelson (-2.4%), Whangarei (-1.4%), Queenstown (-1.3%), and Rotorua (-0.5%). The latter two had increases in last month’s index, reflecting the level of heightened volatility in the market.

QV operations manager James Wilson says it wouldn’t be unusual if home values continue to yo-yo across the country, mainly as a result of declining sales.

“Though low sales volumes continue to impact the monthly value change results significantly, causing some short-term spikes in average home value levels, the longer term trend is clearly a residential property market that is bottoming out after some significant home value reductions over the past 18 months or so,” he says.

“But it’s unlikely the market will reach a consistent bottom overnight. Instead, significant variations in performance in sub markets across the country will continue, as demand returns in certain areas and for certain property types at different times.

Meanwhile, that heightened level of volatility is set to continue until sales volumes increase.”

Wilson says first-home buyers remain the most active in the market, but investors are beginning to show some renewed interest generally. “While investors never removed themselves from the market entirely, they have adopted more cautious attitudes in recent times. Now there are growing numbers competing for entry-level stock in areas they view as offering good value for money.”

He says there are still also some property types, like small to medium development sites, for example, which have taken significant hits to their values since the downturn began and are likely to continue to decline as demand for these properties has dropped away.

New building consents are forecast to remain suppressed throughout the year, as interest rates, build rates and overall demand continue to hamper demand, he says.

Northland

Northland’s residential property downturn has deepened this quarter, with the rate of decline increasing from June to July.

Home values have reduced across the wider region by an average of 12% in the past 12 months, with the Far North District (13.4%) leading the pack. Values are also down 11.5% annually in Whangarei and 10.5% in Kaipara.

Local QV registered valuer Renee Pilkington says Whangarei’s average home value had dropped by 1.4% to $727,387 in the July quarter. “High interest rates and the election continue to remain at the forefront of purchasers’ minds.

“The coastal market has been quiet over the autumn and winter months – though the number of inquiries has picked up in the past few weeks, predominantly from out-of-town buyers. Good quality properties are selling well, but those at the lower end of the market are taking longer to sell. Cash buyers are few and far between, with fewer properties being sold at auction as a result.”

Auckland

Auckland’s rolling rate of home value decline has eased for the fourth consecutive month – just as it has nationally.

The region’s three-month rolling average has dropped from 5.2% in March, to 4.4% in April, 2.3% in May, 2.2% in June, and now 1.5% in July. The average home value is now $1,243,610, which is 11.8% lower than at the same time last year.

Local QV valuer Hugh Robson says there are obvious signs that buyer sentiment was beginning to change.

“There appears to be a slight increase in sale volumes over the past 4-5 weeks. Agents say first-home buyers are still actively looking for property, but there is still a shortage of listings on the market across Auckland. This may result in some price movement in the coming months.

“Investor demand is still fairly quiet overall. Mortgage rates remain high and rents are continuing to increase right across the city.” he says.

Tauranga

Home values continue to fall in Tauranga, but there are signs market sentiment is shifting.

The HPI shows home values have dropped by an average of 2% in the July quarter – a slower rate of decline than the 2.9% quarterly decline in the previous index. The average home value is now $994,791 in Tauranga, which is 12.3% less than the same time last year.

QV property consultant Derek Turnwald says there are further indications the correction is coming to an end and the residential market is close to its low point. Sales turnover is starting to increase and value declines are dropping.

“First-home buyers are realising the market is reaching the end of a decline and are showing stronger interest. Banks are beginning to relax a little with loan application scrutiny.”

He says investors are also starting to show renewed interest in the market. “There’s definitely been a small but noticeable shift in market sentiment over the previous couple of months with open home attendance on the increase.”

Waikato

Hamilton recorded its first quarterly increase in average home value for more than a year – albeit a small one.

The QV House Price Index for July shows the city’s average home value increased by 0.1% to $777,024.

However, heightened volatility as a result of reduced sales activity means it's likely Hamilton’s average rate of home value growth will both increase and decrease in the coming months, with the city’s annual rate of negative growth sitting at 9.5%.

Local QV property consultant Marshall Wu says high interest rates are the biggest constraint, which in combination with inflation, is weighing down on household spending. Real estate agents are reporting longer selling periods and fewer buyers in the market overall, but vendors have started to comprehend the changes that have occurred in the market over the past few months and are meeting the market accordingly.”

Meanwhile, home values have reduced across the wider Waikato region by 2.3% this quarter. The average value is down 9.9% annually.

Rotorua

Rotorua’s zig-zagging residential property market has a small decline in average home value for the July quarter.

Figures show the average home value in Rotorua dropped by 0.5% to $639,396 at the end of July, after an increase of 1.9% in the three months to the end of June.

The average home value is now 9.6% lower than at the same time last year, and 4.7% less than at the start of 2023.

QV property consultant Derek Turnwald says demand is still subdued, but it’s definitely improving. There’s a sense that market sentiment is shifting locally, which the latest data reflects with only small declines over both a one-month and three-month period.”

Turnwald says first-home buyers are showing strong interest, with “reasonably good” open home attendance at well-presented properties. Consents for new homes for the Rotorua District are also substantially higher than last year.

Taranaki

New Plymouth’s residential property market had a small rebound this quarter.

The city’s average home value increased by 0.4% to $717,250, improving on the 0.4% quarterly reduction reported in last month’s QV House Price Index.

Meanwhile, home values are down by an average of 2.8% in Stratford ($469,641), weakening further from the 1.8% decline reported in last month’s figures, with South Taranaki ($420,905) recording a 3.4% average decline for the quarter, down from a 1.3% decline.

Hawke’s Bay

Property values continue to ebb away in Napier and Hastings.

The HPI shows the average home value dropped in Napier by 1.4% to $734,100 and by 1.9% to $759,207 in Hastings. This is an improvement on the quarterly reductions of 3% and 2.2% reported for Napier and Hastings respectively in June’s index.

Over a 12-month period, home values have declined by an average of 12% in Napier and by 12.5% in Hastings. This compares to a national average decline of 10.2% annually.

Palmerston North

Declining home values continue to decelerate in Palmerston North.

The city’s three-month rolling rate of average home value decline has eased down for the fifth straight month, with the latest HPI recording a 0.4% decline in the July quarter. The average home value is $626,028, which is 10.8% lower than at the same time last year.

Local QV registered valuer Olivia Betts says demand for residential property appears to be picking up, even though the number of sales remains consistent. The most recent statistics indicate the downturn is easing with the average house price showing a relatively small decline of 0.4% over the last three months.

Wellington

Wellington’s rolling three-monthly rate of home value reduction has eased for the fourth month in a row.

Figures show the region’s average home value has reduced by 1.7% to $824,100 this quarter. This marks a slight improvement on the 2% average reduction in the June quarter, as well as drops of 4.8%, 3.7%, and 2.6% in March, April, and May respectively.

QV senior consultant David Cornford says home values were on average 14.2% lower than at the same time last year. “Value drops in the region have slowed or even halted altogether this quarter, with Porirua and Upper Hutt both recording small value increases.

“Lower listing numbers are helping to inject some energy into the Wellington property market with open home attendance up and more multiple offers coming in. If listing numbers continue to decline, it will help support a recovery in the market.

However, given the high interest rate environment there is unlikely to be a significant bounce in values in the short term.”

First-time buyers are active in the market and are benefiting from a lack of competition from investors, who continue to have a significantly smaller presence in the market, Cornford says.

Nelson

The downturn deepened this quarter in Nelson, with market sentiment remaining largely cautious.

The city’s average home value dropped by 2.4% to $768,240 in the July quarter. That is an increase from the 1.1% in the June quarter, and the exact same as recorded in the May quarter.

QV Nelson/Marlborough manager Craig Russell says it is a continuation of the cautious market that Nelson has been experiencing for a while. “With the election looming, we expect this to continue in the short term. But confidence in the market is beginning to be re-established, with indications the country is at or near the peak of interest rate hikes.”

“Well located and good quality homes in Nelson appear to be selling soundly with increased numbers at open homes.”

West Coast

Home values continue to yo-yo on the West Coast.

The latest figures show property values increased across the wider region by an average of 0.3% this quarter. It follows a 0.6% decline in the June quarter and a similar 0.2% increase in the May quarter.

Local property values have continued to show more resilience than much of the rest of the country. West Coast homes are worth on average 2.9% more than the same time last year, with values in Grey District up by 6.2%, Buller up by 3.6%, and Westland showing a small decline of 2.7%.

Canterbury

Despite a cold July for the housing market, Christchurch and the wider Canterbury region have had small quarterly home value increases for the first time in more than a year.

The latest figures show the average home value increased by 0.1% across the wider Canterbury region to $701,002, which is an improvement on the 1.3% quarterly decline in June. In Christchurch, the average home value increased by 0.8% to $727,209.

However, the Garden City and the wider Canterbury region did also experience small declines in average home value of 0.4% and 0.5% respectively during the month of July, reflecting high levels of volatility in the market.

“While sales have slowed, a falling number of listings is actually stabilising the market overall and curbing any significant declines,” Olivia Brownie, the local QV registered valuer says.

Dunedin

Property prices have yet to hit rock bottom in Dunedin.

Home values dropped in the city by an average of 1.5% in the July quarter, compared to a 3% decline reported in the June HPI. The city’s average home value is $610,057, which is 7.6% less than the same time last year.

Local QV registered valuer Rebecca Johnston says these smaller declines indicate greater buyer confidence returning to the Dunedin market because of indications interest rate hikes are peaking, inflation is easing, and expectations the property market is at or only several percentage points away from the bottom of cycle nationwide.”

Real estate agents says there are more people at open homes and properties are starting to move faster. Property developers also say investors are beginning to come back into the market.

Queenstown

Home values continue to zig and zag in Queenstown.

The latest figures show the average home value fell this quarter by 1.3% to $1,714,703, despite a small 0.2% increase during July. It’s in contrast to the 2.9% quarterly growth in June and the 2.4% growth in May.

Home values are still holding up considerably better in Queenstown than most the country, with an annual average growth rate of 3.8%, compared to a national average fall of 10.2%.

Invercargill

Home values in Invercargill have increased by an average of 0.8% this quarter.

It follows a similarly small average increase of 0.2% for the June quarter. The city’s average home value is now $458,944, which is 4.8% lower than the same time last year and just 1.7% lower than at the start of this year.

Local registered valuer Andrew Ronald says home values in the city have slipped by an average of 4.8% in the 12 months to the end of July, but there has been limited change to the HPI since March this year, indicating price declines may be levelling off.

“There is still much less demand now compared to early last year, and a greater number of properties on the market.” He says while there is still healthy demand from first-home buyers, there are limited investors as a result of continued interest rate increases and changes to tax deductibility rules.”

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A step too far

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