As interest rates climb, the effect on the housing market has been immense, with new research finding New Zealand's property sales have slumped to the lowest in nearly 40 years.
Figures from CoreLogic show 60,859 properties were sold in the year to February 2023 - the lowest 12-month total since October 1983. This is a 32.7 percent drop from the previous year.
While for the month of February alone, 4100 deals were done, down 33.1 percent from the same month last year, which is the lowest any February since at least 1981.
CoreLogic said interest rate hikes and tighter lending rules have trigged the slump.
In February the Reserve Bank (RBNZ) hiked the official cash rate by 50 basis points.
It took New Zealand's baseline interest rate to 4.75 percent, with the RBNZ having added 450 basis points since October 2021.
The report found Wellington was the weakest of the main centres, with values down 19.7% percent from the peak, while Christchurch is only 4.7 percent down since its peak, CoreLogic said.
It comes as New Zealand's property market is declining from its March 2022 peak.
CoreLogic founds that in the last three months average property values fell 1.5 percent, while since March 2022 peak, average property values fell 9.5 percent.
CoreLogic NZ chief property economist Kelvin Davidson said the sales figures are striking and show just how quiet the market really is.
"Few vendors are in a hurry to sell, given that unemployment remains low. And those buyers who have secured finance know that they can take their time too, with listings abundant and prices falling. This is a recipe for low levels of sales," Davidson said.
There were 16 percent more listings on the market than this time last year, the report said, largely driven by the Nelson/Tasman region and Taranaki.
First-home buyers retreat
CoreLogic found indications first-home buyers could be beginning to retreat from the market.
A reasonable amount of the sales are from first-home buyers (24 percent) and relocating owner-occupiers (27 percent), but first-home buyers may be starting to wane.
"There may now just be signs of their interest rate limits being reached. Of course, it may also be that they've actively pulled back while they wait for prices to fall further. Either way, their share of purchases edged lower in February so it's definitely something to watch," Davidson said.
But Davidson remains hopeful the housing market downturn could still end this year, as mortgage rates start to flatten.
The latest weak GDP data and the global banking issues highlight a possibility that the official cash rate won't rise all the way to 5.5 percent, he said.
'If mortgage rates start to edge lower, net migration continues to rise, and investors start to see value again, the case would be building for this house price downturn to find a floor in 2023," Davidson said.
