Housing recovery ‘not a straight-line’

The housing market’s recovery is not picking up the pace, as buyers and sellers continued to hold back in February, CoreLogic says.

But house prices did inch up 0.3% nationally last month to an average of $930,495, according to the property research company’s latest house price index. That price was up 2.8% from September’s trough, but still 10.8% below the market peak in late 2021.

While prices have now increased for five consecutive months, the rate of the increase had slowed, the figures showed.

In January prices rose by 0.4% nationwide, and that was down from a 1.0% increase in December. Of the main centres, Wellington prices were strongest last month, up 0.6% to a regional average of $915,174.

In Auckland, prices were up 0.2% to a regional average of $1.29 million, while in Christchurch they were largely flat, up just 0.1% to an average of $758,452.

Around the regions, price movements in many urban areas were muted, but ranged from a 0.4% drop in Rotorua and Hastings to a 0.5% rise in Whanganui.

Queenstown was the exception, with a 0.9% rise in February which took its average price to $1.79 million.

CoreLogic chief property economist Kelvin Davidson said the muted price figures showed this was not a straight-line market recovery.

‘‘Given mortgage rates remain high and property sales through January remained at near record lows, buyers and sellers are still taking their time and this is flowing through to more subdued value growth.”

First home buyers still faced significant challenges in terms of saving the deposit and satisfying loan serviceability criteria, while high mortgage rates were an issue for investors and existing owner-occupiers too, he said.

‘‘While the official cash rate remains on hold for now, the risk of a further rise in the short term hasn't dissipated altogether, and the likelihood of official cash rate cuts aren’t on the table for the foreseeable future either.’’

That meant shorter-term fixed mortgage rates, such as the one and two year loans, could remain elevated for a while yet, he said.

‘‘As a result, we could continue to see mixed results across the market, with localised factors affecting each region and stretched affordability continuing to restrict growth in property demand and price growth too.”

Davidson said market sentiment had improved slightly in recent months.

He anticipated growth in national sales volumes of 10% this year, with prices potentially rising by 5%, he said.

“But that’s coming from a low base, and the averages could also mask quite a bit of regional variance. The main centres could be boosted by stronger population growth, while other areas could be held back by affordability concerns.”