The end could be in sight for the property market downturn with the latest Quotable Value (QV) data showing house price drops have eased slightly for the second month in a row.
The latest QV House Price Index released on Tuesday shows home values decreased by 3.4 percent nationally over the three months to the end of May 2023 – a slight improvement on the 3.5 percent quarterly reduction in April and the 3.9 percent quarterly reduction in March. The average value now sits at $888,930, which is 13.7 percent lower than the same time last year and 20.2 percent higher than its pre-COVID-19 level.
The average rate of home value decline has slowed this quarter in 11 of the country's 16 largest urban areas. This includes Auckland (-2.3 percent), Hamilton (-2 percent), Christchurch (-2.5 percent), and Wellington (-2.6 percent).
Queenstown bucked an otherwise pervasive downward trend amongst the main centres, with home values rising by an average of 2.4 percent for the May quarter.
QV operations manager James Wilson said it was still too soon to say if the market has bottomed out.
"It's still very early days and sales volumes remain low across the country. We would still need a few more months of continued softening to claim conclusively that we're at the bottom of the market," he said.
"When the market does hit bottom, we won't suddenly see values begin to increase across the board.
Wilson predicts we will see a "bumpy landing", with some centres reaching the bottom of their descent before others.
"Certain locations and property types may begin to experience some growth sooner rather than later, whereas others may remain flat or continue to soften for a period," Wilson said.
He said areas that appealed to first-home buyers and investors would likely be the first to rise.
"One interesting trend that we have observed is the relative strength of areas that have experienced strong first-home buyer activity over the past 12-18 months," he said.
"In fact, most areas of the country that have experienced positive value growth or held relatively steady over the last quarter have had average values of well below $1m. In other words, 'first home buyer territory.'"
Wilson added while investors haven't removed themselves entirely from the market, they have continued to adopt a wait-and-see approach in many markets.
"However, indications the Official Cash Rate has peaked could entice them back, with valuers and real estate agents at the 'coal face' of the market already reporting a small uptick in interest," he said.
"Time will tell whether we do see a growing number of investors represented in sales volumes over the next few months, competing for entry-level stock."
Wilson said there still remains a high level of uncertainty within the market overall, with people having a "cautious mindset".
"There's a generally cautious mindset out there, especially among many 'Mum and Dad' buyer types," he said.
"While these buyers remain inactive, value levels in areas that used to be strong are likely to remain pretty weak."
Auckland
The average home value across Auckland has slowed for a third month, dropping by 0.3 percent in May to $1,258,521.
Home values are 14.4 percent lower on average than the same time last year, with the quarterly rate of decline easing from 4.4 percent in the last QV House Price Index to 2.3 percent in the latest.
"The Auckland market has remained fairly quiet over the past month or so, but the rate of decline in house prices appears to have eased somewhat. This may be a signal that the market is 'bottoming out'. Only time will tell for certain," local QV valuer Hugh Robson said.
"Mortgage rates remain high and many owners who purchased a property over the past 2-4 years are facing the prospect of re-fixing their mortgage at a considerably higher interest rate, coupled with a property that has decreased in value considerably."
Wellington
The property market in the Capital has also slowed once more, indicating the market downturn could well be bottoming out.
The index showed home values dropped across the region by 2.6 percent through the May quarter.
This is the first time since the downturn began that home values in the region have tracked downward at a slower quarterly rate of decline than the national average (-3.4 percent).
The average home value is now $831,673, which is 19.1 percent lower than the same time last year and declines have been seen in Porirua (-7.7 percent) and Kapiti Coast District (-4.5 percent).
"Value declines in the Wellington region have been relatively small over the last two months, providing further support that we may be at, or close to, the bottom of the market," local QV senior consultant David Cornford said.
"Only time will tell for certain. In the meantime, the market remains relatively quiet and buyers continue to lack a sense of urgency."
The election is under five months away - on October 14 - and Cornford said this is the "next big foreseeable variable" impacting the property market.
Cornford added if National is elected into power in October, it could help the market recover.
"We expect many people will hold off on their purchasing or selling decisions until after this. If a National government is elected, it is likely that investors may start to become more active in the market again, competing with first-home buyers and potentially supporting a market recovery." Cornford said.
"First-home buyers currently have little competition from investors, which combined with a slight easing of bank lending criteria, is currently providing them with a relatively good opportunity to enter the market."
Canterbury
The Canterbury region saw values bounce back in the May quarter, with QV saying it provided a "more active" property sector in May.
Home values dropped by 2.5 percent on average for the Garden City this quarter, despite a relatively strong May, which saw the average home value in Christchurch increase by 0.8 percent to $727,585.
Local QV registered valuer Olivia Brownie said the Canterbury region may be past the point of seeing any more "significant" declines in property values.
"The latest figures could be an early indication we are reaching the bottom of the trough, but we still expect the decline will continue to be inconsistent with so many factors still at play," Brownie said.
"The slight adjustment of the First Home Grant price caps has now come into effect - we note that properties in the $500,000 to $800,000 value range have seen more enquiries as a result."
Throughout the Canterbury region, home values dropped by an average of 2.1 percent for this quarter.
But it wasn't all bad, with Hurunui (0.3 percent), Waimakariri (0.5 percent), Ashburton (1.4 percent) and Waimate (2.3 percent) all recording positive growth throughout the three months to the end of May.
Queenstown
Queenstown was one of the regions that bucked the trend and slowly tracked upwards, opposite to what is happening around the country.
The index showed homes in Queenstown were worth 3.1 percent more on average at the end of May than at the same time last year.
Even though the average home value dropped by 1.1 percent to $1,718,497 in May, that figure is still up 2.4 percent for the quarter.
Local QV registered valuer Greg Simpson said the positive value growth in the region comes as there are reduced amounts of sales.
"The Queenstown Lakes District has selling prices that are above other districts and this is likely to continue given the recovery of the tourism industry and the general shortage of housing in the main centres of Queenstown and Wanaka," Simpson said.
He added the Reserve Bank's latest OCR increase would continue to have a "cooling effect" on the housing market.
"There's been strong restraint applied to the housing market from tightening credit conditions."
