House price fall hits new record
Rising interest rates are causing buyers to hang back from the property market even though there are now almost 75% more properties to choose from than the same time last year, the Real Estate Institute (REINZ) says.
It has released its data for October, which shows a 1.9% increase in the national median price compared to September, but a 7.5% decrease year-on-year. The median national price in the month was $825,000.
The institute’s House Price Index (HPI), which measures the changing value of residential property nationwide, showed an annual decrease of 10.9% – down 12.4% from its peak in November 2021.
Kiwibank economists said that was the biggest fall recorded in the institute’s data since its records began in the early 1990s. ‘‘House prices don’t appear to have hit the bottom yet.’’
Sales activity dropped 34.7% compared to the year before. The number of properties available for sale was up 74.7%.
Auckland’s median price decreased 12.7% compared to October last year, from $1.249 million to $1.09m.
The region has recorded six consecutive months of annual median price decreases for the first time since the period of August 2008 to January 2009.
In Wellington, the median price was down 17.2% annually, from $1m to $828,000 in October 2022.
Real Estate Institute chief executive Jen Baird noted that the year-on-year comparison included the period last year when Auckland came out of lockdown restrictions. ‘‘In October 2021, increased optimism over the easing of lockdown restrictions in Auckland combined with a delay to the introduction of changes to the Credit Contracts and Consumer Finance Act (CCCFA) from October to December impacted market activity,’’ she said.
‘‘Able to transact and keen to move before tougher lending restrictions were implemented, people come to market hard and fast, contributing to a sense of urgency that is reflected in REINZ property data for October last year and is apparent in our annual comparisons.’’
But she said there were other factors affecting the market this year. Rising interest rates, the higher cost of living, tax legislation and property regulation as well as tightened lending criteria had slowed buyer activity.
‘‘In September, the data showed the usual spring uplift was subdued – the story remains similar through October. Nationally, sales activity is down 34.7% yearon-year and 4.3% month-on-month.
‘‘Properties continue to change hands, and people continue to make life decisions. However, buyers and vendors are acting with caution, weighing up their options.’’
She said there were signs that first-home buyers were ‘‘dipping their toes in’’, to take advantage of more properties being on the market and banks lending again.
‘‘While this is positive news, further increases in interest rates are putting a damper on buying plans in this buyer group. Meanwhile, reports from salespeople across Aotearoa suggest investors continue to step back,’’ she said.
The Kiwibank economists said the price falls would be deeper if the labour market were not so strong.
Nationally, the median number of days to sell a property in October was 44 – up 10 days compared to October 2021 and new listings were down 4% annually. New Zealand, excluding Auckland, had an annual increase of 3.3%.
More than 5% of Auckland homes sold for a loss in the three months to September, and that is the most since 2019, new CoreLogic figures show.
The property research company’s latest Pain and Gain shows 96.8% of properties sold nationwide over the September quarter went for more than the seller bought them for.
That was down from 98.1% in the previous three months, and from the record high of 99.3% at the end of last year when the market was at its peak.
In Auckland, the decline was more pronounced with 5.8% of properties reselling at a loss, up from 3.2% in the previous quarter. It was the highest figure since the end of 2019, when it hit 7.1%.
Wellington and Dunedin also recorded jumps in the number of loss-making resales, up to 3.4% and 3.1% from 2.6% and 2.2% respectively.
Results in Hamilton, Tauranga and Christchurch were steadier, but more properties sold at a loss than previously, at 2.6%, 2% and 1.6%.
CoreLogic chief property economist Kelvin Davidson said the weakening trend in resales that had emerged earlier in the year had become even clearer over the past three months
It was now past the turning point as the wider housing market downturn affected homeowners’ ability to sell above their original purchase price, he said.
‘‘There is now a bit more pain and a bit less gain for sellers, as listings and interest rates have risen, mortgage credit has tightened, and property values themselves have dropped.’’
The impact of a downturn on resale performance was slowmoving, because the average hold period was seven to eight years, and that meant the vast majority of resellers would be sitting on large capital gains, he said.
‘‘Even though profits are less than they would have been last year, they are still significant. But there is an impact with gains becoming less common, and the dollar value of those gains falling quite quickly.’’
In dollar terms, the national median resale profit last quarter remained high at $331,000, but that was down from the peak of $440,000 at the end of last year.
Auckland’s median resale profit was $438,401, down from $618,000 at the start of this year.
Tauranga and Wellington also had median resale profits of over $400,000, but Wellington’s had dropped by around $200,000 from the market peak late last year.
The median resale profits in Hamilton, Christchurch and Dunedin were $368,000, $270,000, and $300,500 respectively.
Davidson said this showed the impact of the downturn, but while further weakness lay ahead, context was important.
In 2000 and 2001, it was common for the profit-making share of resales to be as low as 75%, and in the post-global financial crisis period, the figure was often as low as 80%, he said.
‘‘While it’s uncertain if we’ll get there again, historical data suggests profit-making resales could fall as low as 90%, or even lower, over coming quarters, as existing borrowers reprice from previous low rates onto a higher repayment schedule, potentially forcing faster sales.’’
If unemployment stayed low, the figures might not move to the same extent as happened in the previous downturns, he said.
‘‘The gain percentage is set to continue to decline, and the pain share to rise. But while resale potential is weaker, it is not weak, and most people can still sell for a profit.’’
The softer resale performance was evident across owner types and property types, with profitmaking apartment sales at the lowest point since early 2015 at 82.4%.
But the national median resale loss across the board did not change much. It was around $41,000, up from $40,000 in the previous quarter.
Of the loss-making sales, 31% were properties that had been held for less than a year.