New Zealand's housing market downswing 'continues to roll on' but worst over for most areas - report

  • 05/07/2023
The consistent trend for house prices in 2023 "was the inconsistency".
The consistent trend for house prices in 2023 "was the inconsistency". Photo credit: Image - Getty Images

A new report out by CoreLogic shows Aotearoa's housing market downswing "continues to roll on" as the decline in property values accelerated in June. 

CoreLogic's House Property Price Index (HPI) shows the value of property across the motu weakened for the month of June, down 1.2 percent compared to the 0.7 percent drop in May. 

The report indicates the monthly decline in property prices was led by weaker figures in Auckland, down 3.0 percent for the month, with four out of six of Aotearoa's main centres recording larger falls in June. 

New Zealand's housing market downswing 'continues to roll on' but worst over for most areas - report
Photo credit: CoreLogic

CoreLogic says the decline takes the national annual rate of change 10.6 percent below the same time in 2022, from 10.2 percent in May.

Its head of research Nick Goodall said the acceleration shows the impact of "such a long and strong" rate hiking cycle "as stretched mortgage affordability continues to constrain demand".

"The latest data may be a speed bump for expectations the housing downturn may have already ended, though the variable results evident across the country are likely supportive of the argument that a housing market trough is not far away."

Aotearoa's average house value remains $183,000 higher than before the COVID-19 pandemic in March 2020. But Goodall says the fall from the peak now exceeds $130,000. He said that shows just how strong the "pandemic-induced growth upswing" was.

"Rather than focus too much on the exact timing of the bottom of the market, we believe it's more about assessing the key market drivers and recent changes in those drivers, when setting expectations of where the market is headed," Goodall said. 

He said the amount of properties listed for sale has been "weak all year" and is tracking below each of the past three years.

"This, alongside property sales ticking higher, has meant the overall volume of properties on the market is reducing."

Goodall said reduced supply, paired with high net migration, increased confidence, looser credit requirements and near-peak mortgage interest rates "have supported demand and provided the setting for upcoming market change".

Though Goodall is not expecting an increase in demand to lead to a strong bounce back in prices. 

"Stretched affordability, due largely to still-high property values and high interest rates compared to recent history is likely to keep a lid on demand, which should lead to a much more stable and balanced market once the bottom is reached."

He added the consistent trend for house prices in 2023 has been "inconsistency".

"With the monthly rate of change regularly dipping and recovering in back-to-back months."

Goodall said the changing market dynamics have meant inconsistent sales performance, as the demand for property varies across different price ranges, property types and cities. 

"It's just as easy to find pockets of high demand and strong sales as it is to find a property which has been languishing on the market before being discounted," he said.

"Nonetheless, we still believe it appears the worst of the downturn is generally over for most areas."