Widespread falls in house prices
House prices have taken their biggest quarterly tumble nationwide since early 2009, and it is unclear how long the downturn will continue, a property researcher says.
CoreLogic’s latest house price index showed prices nationally fell by 0.8% in June, following declines of 0.8% in May and April. It left the national average at $1.01 million, up 12.8% from $906,532 at the same time last year.
But the quarterly fall of 2.3% was the biggest drop over a threemonth period since February 2009, which was just before the market bottomed out after the global financial crisis (GFC).
The decline was widespread – all the main centres, apart from Christchurch, recorded quarterly price falls.
Auckland and Wellington had the biggest drops, at 4.9% and 4.7%, which took their average prices to $1.44m and $1.07m respectively.
In Hamilton, Tauranga and Dunedin, prices were down 1.2%, 1.8% and 2.4% to averages of $880,947, $1.16m, and $682,108. In Christchurch, prices were up 3.3% to $783,216.
Of the regional centres, only three – Whanga¯ rei, New Plymouth, and Queenstown – had quarterly price increases, while prices decreased most in Lower Hutt and Upper Hutt where they were down 6.2% and 6.9%.
CoreLogic head of research Nick Goodall said the GFC trough came after a succession of negative quarters, but the current downturn was just setting in, and it was uncertain how long and how far it would last.
Affordability constraints coupled with higher interest rates and tighter lending conditions were likely to keep a lid on housing demand over the coming months, he said.
‘‘Under these circumstances, it is difficult to foresee any respite for falling house prices in the near term.
‘‘A bounce back in demand would help, but that probably won’t happen until interest rates stabilise, or start to fall again.’’
The easing of the Credit Contracts and Consumer Finance Act lending rules was likely to have a minimal impact on the market, in part because confidence was so low, he said.
‘‘But there is a danger that negativity overshoots the mark, and makes things worse than they would otherwise have been.’’
Fears of recession were contributing to
the gloomy outlook, but he was not expecting a crash.
‘‘Instead we expect a gentle adjustment back to some level of normality, because people have jobs and the labour market is tight which provides support.’’
CoreLogic expects a peak-totrough drop of 11.8% in prices, which would take them back to where they were in the middle of 2021.
It had picked March as the trough, but Goodall said the trough might be nearer than previously thought, although that was likely to be followed by a long plateau period, as happened after the GFC.
Some areas were more vulnerable to bigger price falls, he said.
These included areas where a lot of property had been sold for development, such as Lower and Upper Hutt and South Auckland, and markets where affordability was particularly stretched, such as in the central North Island and Hawke’s Bay.
But Christchurch, where housing affordability relative to income was still favourable, and was attracting buyers to the city, was likely to perform more strongly.
Goodall said a drop in housing prices will support an improvement in affordability, but higher mortgage costs and stricter lending policies will probably outweigh the renewed affordability advantage.
‘‘Despite this, there is still demand for property and there are buyers who are finding a way to buy, and there are opportunities in some areas, and with some property types.’’