Market weakness persists through August
There were very few signs of an end to the current period of weakness in property values in the August data, with CoreLogic’s Hedonic Home Value Index (HVI) showing a further decline of 0.5 %, bringing the total drop from the February “mini-peak” to 3.7. % nationally. With median values now sitting at $811,583, this 3.7% drop translates to a drop of approximately $31,100.
The declines in values in August were seen in most parts of the country, and certainly in many of the major centers.
- Auckland fell another 1.0%, bringing its recent declines to a total of 6.0%.
- Hamilton was down 0.8% in August.
- Falls in Tauranga, Dunedin and ‘larger’ Wellington (cumulative at Porirua, Lower & Upper Hutt and Wellington City) were a little more modest.
- Christchurch actually rose slightly by 0.2%.
Longer term, the divergences in some of the major centers remain quite stark. For example, Auckland’s values are now around 22% lower than the post-COVID peak, and “only” around 9% higher than pre-COVID levels, with Wellington’s numbers almost identical. But in Christchurch, values have fallen a much lower 7% since the post-COVID peak, and are still more than 40% higher than pre-COVID levels.
In some of our other major urban areas there are also quite stark differences. In August alone:
- Invercargill and Whanganui both saw their values increase by 0.7% (and Queenstown by 0.5%).
- Whangarei fell 0.6% and Palmerston North fell 0.7%.
- Meanwhile, compared to the post-COVID peak, Invercargill and New Plymouth, for example, are down less than 3%, while declines have been around 20% in Napier and Gisborne.
When it comes to the factors behind these trends, it’s no surprise that values have generally been declining since around February. Yes, interest rates are falling, but that has been slow to happen, and of course they remain quite high for new borrowers, not to mention existing mortgage holders who might previously have secured a rate of 7% or more.
Meanwhile, housing affordability is still quite limited (even after prices have fallen since late 2021), there are plenty of property listings – giving credit-approved buyers the advantage when it comes to negotiation – and of course , the labor market is also weakening. . Even for those who keep their jobs, the feeling of insecurity can slow down their activity in the real estate market.
However, in the future, a short-term recovery linked to falling interest rates cannot be ruled out. After all, that’s certainly what we’ve seen in the past when households feel happier (and wealthier) due to lower mortgage costs. And debt-to-income (DTI) caps won’t have much impact in the short term either.
However, we believe that DTIs could start to become more restrictive when “conventional” mortgage rates fall to around 5.5% or less. It could be the middle of next year, or maybe even sooner. Therefore, if we look at the real estate market over a 12 to 18 month horizon, it is difficult to imagine a truly strong or lasting new boom.
If you want to dig deeper into how property values are trending in your area, CLICK HERE to access the latest CoreLogic Home Price Index (HPI). This comprehensive report provides invaluable insight into property value trends in New Zealand and can help you make informed decisions.
The Mortgage Supply Co is here to guide you through every step of your real estate journey, whether you are looking to buy, sell or refinance. Contact the team today to discuss your unique situation and how we can help you navigate an ever-changing real estate market!
