PROPERTY VALUES UNDER PRESSURE

The nationwide average property value suffers its first annual decline in more than a decade, but some regions are feeling the changing market environment worse than others.

EW ZEALAND’S average property value recorded its first annual decline in more than a decade, figures from the Oneroofvalocity House Value Index show.

The nationwide average property value dropped 2.7% ($28,000) in the 12 months to the end of October to $1.009 million, amid fears that further interest rate hikes in response to inflation could prolong the decline well into 2023.

The last time the country's average property value suffered an annual decline was in July 2011, when it fell 0.9%, but back then the housing market was on the cusp of revival following the Gfc-induced slump.

Six regions recorded annual declines, up from five in the year to the end of September, with house prices in Greater Wellington taking the biggest knock.

The region's average property value dropped 13.1% ($142,000) in the last 12 months to $940,000 - and the rate of decline does not appear to be slowing either. In the last three months alone, property values in the region fell 8.1% ($83,000), and are down 17% since peaking in March.

Also down year-on-year are Auckland (-5.5% to $1.398m); Manawatu-whanganui (-4.5% to $633,000); Hawke's Bay (-4% to $833,000); Nelson (-2.9% to $832,000); and Bay of Plenty (-0.2% to $1.002m).

Quarterly declines were recorded by every region bar West Coast, where the average property value climbed 2.7% ($11,000) to $414,000.

Of the country’s 72 territorial local authorities, 15 saw value growth in the three months to the end of October.

Opotiki, in the Bay of Plenty, enjoyed the biggest growth spurt, with its average property value up 9.7% to $666,000. Also recording relatively strong growth were Hurunui, in Canterbury (+5.7% to

$700,000); Westland, in

West Coast (+3.9% to

$458,000); and Buller, also West Coast (+3.5% to

$385,000).

Property values in most

TAS were up year on year, but margins are getting smaller, with just

14 TAS recording double-digit growth.

The biggest year-on-year drops were in Greater Wellington, but also coming under pressure are Palmerston North

(-8.4%), Napier (-8.2%) and Dunedin (-6.1%).

Nationwide sales volumes fell from 93,847 in the 12 months to the end of September to 90,687 in the 12 months to the end of October. Of the 2265 suburbs where there was sales activity in the last 12 months, just 905

recorded 20 or more settled sales, down from 914 in the 12 months to the end of September and down from 1014 in the 12 months to the end of March.

Of the 905 suburbs with

20 or more settled sales in the last year, just 88 recorded quarterly value growth, while 445 saw year-on-year drops in their average property value.

James Wilson, head of valuations at Oneroof's data partner, Valocity, said: "Property prices continued their downward trend in October, dropping by 4.1%, or $43,000, since July, and 8.6%, or $95,500, since the February peak. The rate of value decline has also increased, from -3.7% three months ago to -4.1% in October, with the average property value now in danger of dropping below the $1m mark."

Wilson added: "The arrival of spring has seen an increase in new listings. However, in a market that already has an oversupply of properties available for purchase, this increase has simply exacerbated the issue. As interest rates and the cost of living continue to rise and lenders apply higher test rates as part of the mortgage application process, borrower ’s purchasing power continues to reduce. The number of days to sell also rose as the result of more options for buyers on the market and disappearance of the FOMO effect.

"Across the regions, 15 of 16 had values decline from three months ago, and six are now below values from October last year. Wellington continues to hold its spot as the region with the poorest performing housing market, while the best-performing locations continue to be those at the lower end of the price scale."

Wilson said the fact that inflation remained higher than the targeted range was likely to lead to further rises in the Official Cash Rate (OCR).

"Placing additional pressure on property is uncertainty in the global investment market. This has hampered Kiwisaver performance and therefore reduces the amount available for withdrawal by first-home buyers," he said.

"What this means is that property values will continue to decline into 2023.

Wayne Shum, head of research at Valocity, said mortgage registrations were down 12% on the previous quarter.

"First-home buyers’ share of registrations rose from 38% to 39.3% nationwide. This could be due to the lower prices, which means lower deposits – something that has been a significant roadblock in the past. That said, the number of first-home buyer registrations dropped by 2437 over the same period," Shum said.

"Investors’ share remained similar to the previous quarter at 25.4%."