Prices f latten, demand down

House price increases have eased off, and a fall in buyer demand is the reason, Quotable Value (QV) says.

The cost of the average home nationwide went up 1.3% to $925,812 over the three months to the end of February, according to the valuation company’s latest House Price Index. That rise in prices left the national average 0.6% higher than at the same time last year, and it was the first annual increase since August 2022.

But the rate of increase was down from 2% over the quarter to the end of January, and of the 16 areas monitored only Tauranga, up 3.1%, Nelson, up 1.2%, and Marlborough, up 3.1%, had stronger price growth than in the previous quarter.

In the main centres, Christchurch and Wellington prices continued to grow, but at a reduced rate, up 2.5% and 2.4% to averages of $874,295 and $760,737 respectively.

Auckland’s price growth paused for the first time since August last year, dipping 0.1% to a regional average of $1.28 million.

Rotorua had the biggest quarterly decline, with prices down 6.3% to $649,119, while Queenstown had the biggest increase, with prices up 4.3% to $1.82m.

QV operations manager James Wilson said the slow but steady growth that had been occurring since June last year now appeared to be flattening even further.

The trend was largely being driven by diminishing demand, he said.

“In some areas, the increase in new listings that came onto the market in January and February appears to have met market demand, cooling competition in places like Auckland, and flattening price growth.”

While the trend was expected to continue over the next few months, significant price declines were unlikely, even if sales volumes reduced further in the winter months, he said.

“But with such strong economic headwinds in place, we’re also unable to pinpoint anything that would spark a return to strong price growth over the next three to six months.”

Ongoing uncertainty about whether the Reserve Bank would cut or hike the official cash rate was also weighing on the market, he said.

Independent economist Tony Alexander’s latest survey of real estate agents provided further evidence of a decline in buyer demand.

A net 9% of 391 respondents reported they were seeing more people at open homes this month, but that was well down from the net 57% who reported more attendees in January.

At the same time, a net 6% of agents said that fewer people were showing up at auctions, down from a net 22% in January.

Alexander said the results did not show a return to the high disinterest levels of 2021 into 2023, but did indicate buyers had stepped back in their purchase or market research plans. Agents reported buyer concerns about their employment had increased, and the decline in worries about interest rates had reversed in the face of discussion about monetary policy tightening again, he said. “But appraisal requests are running at very high levels, suggesting that for the moment motivated sellers are exceeding motivated buyers.

Realestate.co.nz’s latest figures showed the number of properties listed was at an eightyear high at the end of February, Alexander said. “As a result, FOMO (fear of missing out) levels have fallen to 11% from 37%, and the market is solidly a buyers market again.”