New Zealand house prices continued to fall throughout May, with the trend towards weaker housing market conditions likely to continue, CoreLogic says.
In its latest House Price Index, CoreLogic said national house prices fell another -0.8 percent in May, which is consistent with April (-0.8 percent). The quarterly fall of -0.9 percent across the country is the biggest drop over a three-month period since the end of 2010 when the market was still in recovery mode from the global financial crisis (GFC).
CoreLogic head of research Nick Goodall said the persistent declines in Wellington and Dunedin housing values have seen the annual growth rate plummet to single figures, while Hamilton is hanging on to double-digit growth at 10 percent.
Christchurch has seen the highest annual change in growth, with 24.5 percent, and the average value of homes at $763,168.
Auckland remains the main centre with the highest average house price, at $1,473,076. But additionally, house prices there fell a further -1.5 percent in May.
"Christchurch remains the only main centre experiencing any real growth - supported by better affordability. The latest house price to income ratio in Christchurch sits at 6.8, compared to next-best Wellington at 8.1," Goodall said.
"Similarly, the share of income required for mortgage repayments is more favourable in Christchurch (38 percent) ahead of Wellington (45 percent)."
While Goodall said strong value growth was the key factor in unaffordable housing over the last two years, increasing interest rates are now the key protagonist.
Around the main centres, quarterly rates of change continued to fall across Auckland in May, except in Rodney, where a -0.1 percent fall over the month had little impact on the rest of the quarter's growth, which totalled 2.1 percent, Goodall said.
There were relatively consistent declines across the larger four areas of Auckland in May, with North Shore, Waitakere, Auckland City, and Manukau each seeing falls of either -1.6 percent or -1.7 percent.
"Falls over the three-month period to the end of May are greater in Manukau however, which could reflect the significant amount of development across the area, now that developers are finding themselves in trouble - over-leveraged and short on cash due to constrained supply chains and increasing costs," Goodall said.
In Wellington, the Hutt Valley - both Upper and Lower Hutt - have experienced the largest fall in values over the last three months, at -6.2 percent and -4.5 percent respectively. However, values are also scaling back in both Wellington City (-3.6 percent) and Porirua (-3.1 percent).
The quarterly fall of -6.2 percent in Upper Hutt supersedes the worst rate experienced during the GFC.
Outside the main cities, a few areas are showing sporadic growth, Goodall said, including Gisborne and Queenstown.
Gisborne had the highest growth in house prices in the regions in May (1.6 percent) and also had a 14.7 percent increase in the average value.
Whereas Napier saw the largest percentage drop in house prices in May (-1.7 percent), followed by Hastings (-1.4 percent).
Queenstown had the highest change in average value, with prices rising 26 percent in the past year to $1,694,211.
Goodall said the latest update to the CoreLogic forecast of residential sales volumes brought to light the reality of how much and how fast conditions are changing in the property market.
He said CoreLogic expects 78,000 sales throughout 2022, a significant reduction from the 92,000 forecast only three months ago. This change was mostly driven by the sharp increase in interest rate expectations, which impact the number of money people can borrow and will further slow the market.
"Not only will agents be budgeting for less income, there's also a broad range of industries and professions intertwined with the real estate industry and the transactions within," Goodall said.
"For example, registered valuers will likely see reduced work, fewer transactions will hit the banks' bottom lines as new lending activity reduces, moving companies may have less big moves to do, insurance companies could see fewer new enquiries and even telecommunications and utility companies could see less demand with fewer new households being created.
"The impact of reduced real estate transactions (let alone reduced values) on the broader economy should not be underestimated, and many businesses should consider budget scenarios with up to a 20 percent reduction on activity compared to 2021."