An expert says the housing market is unlikely to crash despite prices experiencing their largest quarterly drop in more than a decade.
The average home decreased in value by -0.6 percent nationally over the past three-month period to the end of March, according to the QV house price index. This was down from the 2.3 percent rise in quarterly growth seen in February, with the national average value now sitting at $1,046,636. This is an average annual increase of 18.3 percent, down from 22.9 percent annual growth last month.
And main centres are bearing the brunt of the rising interest rates and tightening bank credit with prices falling -1.5 percent over the last three month period in the Auckland region. The average value now sits at $1,503,922 with annual growth of 18.6 percent, down from the 23.2 percent QV reported in February.
But despite the drops, GV general manager David Nagel said the strict credit rules and increasing interest rates mean first home buyers might still miss out.
"I don't think we are going to see prices coming down to a level that is going to make a significant difference for first home buys," Nagel told AM on Friday.
He said despite the rising interest rates and cost of living, New Zealand is close to full employment so the market is unlikely to crash.
"I think what we are seeing is a correction where we've had these massive increases over the last 12 months, those areas that have had the biggest increases are showing the biggest correction.
"I don't think we are going to see the bottom fall out of the market. I think that while we've got a relatively strong economy, we've got coming close to full employment, a lot will depend on what happens overseas.
"There's a lot of uncertainty, a lot of moving parts with the conflict in Ukraine and uncertainty about what's happening with inflation and when interest rates are going to peak. But there's plenty of padding there with the New Zealand banking system, so I don't think we are going to see thousands of mortgagee sales over the next 12 months, which would mean that there might be a collapse in prices, I can't see that happening."
Nagel said it's likely New Zealand will see a continued gradual decline in value levels for some of the locations that have had the greatest value growth recently, while the regions will likely continue to see a mix of stagnated growth over the coming 12 months.
Home values have dipped -1.5 percent across the Auckland region this quarter, following two straight months of negative growth, QV said.
Papakura (-3.3 percent), North Shore (-2.3 percent) and Auckland city (-2.3 percent) saw the biggest quarterly declines, with Rodney standing alone as the only district in the Auckland region showing any significant home value growth at 1.4 percent over the past three months. In the wider Auckland region, the average home value is now $1,503,922.
"The Auckland market has continued to slow down over the past 4-5 weeks, with a number of suburbs now showing a slight drop in price level," said local QV registered valuer Hugh Robson.
"This confirms the market has changed from what we experienced in 2020 and 2021. Bank interest rates continue to creep up and tighter Government lending rules continue to have an impact on the market."
He said in recent years, many of the sales across Auckland were to developers who were buying their next building site for redevelopment or investors who were land-banking.
But with this change in the market, along with a shortage of some building materials - several developers were sitting tight and delaying construction so they're not caught with brand new development and a lack of buyers.
But despite this, Robson said high prices were still being paid for premium properties in sought-after locations, such as waterfront properties in Herne Bay, Westmere and St Mary's Bay.
Average home values have declined right across the greater Wellington region through the first three months of 2022.
QV said the biggest reduction in average home value has occurred in Hutt City, with the three-month rolling average currently sitting at -5.2 percent following four consecutive months of declines. But the average decline across the entire region is -1.5 percent, with values still up by 13.7 percent over the past 12 months.
QV senior consultant Blake Ngarimu said the stats showed a continuing fall in the market.
"It's now more evident that Wellington is becoming a buyers' market. Developers are reducing asking prices and properties are sitting on the market for longer and typically selling below or at asking price," he said. "It's a clear indication that the higher interest rates and tougher lending conditions, coupled with the increase in supply, are having an impact on the market."
Although the Government had given direction to soften lending rules on creditworthy borrowers in March, in wake of the dip in the market, Ngarimu said it was unknown if it would help ease the current dip.
"Open home attendance remains low, particularly at the lower end of the market, which is more heavily finance-driven. However, there has also been a significant increase in listings, giving buyers more options."
Home values have dipped for the first time in Christchurch since May 2020, which is just after New Zealand had emerged from a two-month COVID lockdown.
They dropped by -0.2 percent last month, with the three-month rolling average sitting at 1.8 percent, which is still well above the national average (-0.6 percent). The average home value in the Garden City is now $797,518, which is 32.4 percent higher than it was 12 months ago.
"Things have certainly cooled off, especially at the lower-value end of the market, with the city's more expensive home values still showing more strength," said local QV property consultant Olivia Brownie.
"The number of days to sell is increasing as more stock comes on to the market, therefore creating an environment where buyers can negotiate or take their time."
Home values increased by an average of 2.4 percent across the wider Canterbury region over the first three months of this year, with the Selwyn District leading the way with 6.1 percent. All Canterbury districts showed significantly less home value growth this quarter than over the last three months of 2021.