$40b wiped off housing market value

New Zealand’s housing market lost $40 billion of value over the first half of this year, new data from CoreLogic shows.

The company has released its latest Property Market and Economic Update, which says the total value of New Zealand’s residential real estate was $1.69 trillion at the end of the second quarter of this year, down from $1.73t at the end of 2021.

The country’s average residential property value is now $1.018 million.

There were mortgages secured against 20% of that value.

CoreLogic chief property economist Kelvin Davidson said sharply rising interest rates and homeowners refinancing existing mortgages would ‘‘test’’ the market over the rest of this year.

‘‘There are multiple reasons contributing to a slowdown in values. These include more listings, a shift in pricing power towards buyers, a tighter mortgage lending environment and sharply higher interest rates,’’ Davidson said.

‘‘This weaker phase for the property market looks set to continue into 2023, and even when the floor is reached, the experience of the Global Financial Crisis was that it took another two to three years for the next upswing to start as values plateau.’’

He said a significant drop in sales volumes had given time for the stock of available listing to be replenished, and had put the power in the hands of buyers.

‘‘The sharp post-Covid upswing in values has now given way to a firm correction, and the falls already seen to date have been spread across most geographical areas and price brackets. It’s possible the national average property value will ultimately drop by 10% to 15% by the middle of 2023, which broadly suggests we’re potentially halfway through this correction in both duration and scale.’’

Davidson said it had been more than a decade since there had been a similar drop in sales activity.

ANZ yesterday updated its house price forecast to a fall of 15%, from a previous prediction of 12%. It said high inflation would mean more pressure to increase interest rates, which would push prices down.

‘‘The rest of 2022 and into 2023 looks set to remain a testing time for market activity levels,’’ Davidson said.

‘‘The economy remains a little fragile, net migration could stay relatively subdued even as the borders fully reopen, and on top of that, credit conditions remain restricted and mortgage rates continue to rise. All of these factors point to further downwards pressure on property sales.’’