As per valuation and property services firm Quotable Value, there are rising evidence that the surge in New Zealand housing prices have finally peaked.
According to their findings, the typical New Zealand house’s yearly growth rate fell by roughly 4% between January and February.
The national average value of a residential property in New Zealand is presently $1.053 million.
The average valuation in the Auckland region is $1.519 million, with yearly growth declining 4.4 percent between January and February.
And it’s not only in Aotearoa’s largest city. The pace of three-monthly value rise in all 16 of the main urban regions monitored by QV has slowed from January data.
According to the national valuer’s report for the three months ending February, the national average house gained in value by 2.3 percent, compared to 6.1 percent in the previous quarter.
“Three monthly value growth for the December to February period may look quite rosy at 2.3 percent growth, but for the last two months there’s been no growth at all, while February actually shows a decline in values by 1 percent,” QV general manager David Nagel said.
With a nationwide average value of $1,053,483, annual growth slowed to 22.9 percent, down from 26.8% in January.
“There are less buyers out there now with the tightened credit rules and rising interest rates taking a number of first-home buyers and investors out of the market altogether,” says QV General Manager, David Nagel.
“Increased listings from both new builds and existing homes are providing the dwindling buyer pool with ample choice and this is putting downward pressure on [New Zealand housing prices].”
According to Nagel, it is taking longer to sell properties this year, with fewer people attending open houses and a decrease in the number of residences sold at auction.
“While part of this may be attributed to Covid-19, primarily we’re seeing a residential property market that has peaked and is searching for the new equilibrium.”
Looking ahead, the housing market is projected to be impacted by events such as the crisis in Ukraine, an expected outflow of Kiwis overseas, and the lingering economic uncertainty around Covid-19.
“We’ll likely see a continued gradual decline in the rate of home value growth with a correction in some locations that have experienced hyper-value growth throughout the past 12 months,” says Nagel.
New Zealand housing prices affected by migration
The pace of three-monthly value increase in all 16 of the main urban regions monitored by QV has slowed since January.
“This is a pretty good sign the market has turned,” Nagel said.
“The annual rate of value growth is still exceptionally high though, reflecting the very strong value increases we saw last year. So that means it will take some time for this measure to reduce to more ‘normal’ levels of growth.”
He stated that the housing market was facing a number of unknowns that could put additional pressure on New Zealand housing prices, including international uncertainty about the Ukraine conflict, ongoing concerns about the effects of Covid-19 on the economy, and how such factors could drive up inflation and interest rates.
Furthermore, Nagel stated that an expected net rise in the number of people departing New Zealand might decrease home demand even further.
“New migrants entering New Zealand are not expected to impact the housing market until much later in the year.”
New Zealand housing prices to fall further
The apparently out-of-control housing market is being tamed, with price drops expected to be bigger than originally anticipated.
The ASB bank predicts that New Zealand housing prices would decline by 6% by the end of the year, up from 2.9 percent earlier predicted.
Meanwhile, the ANZ bank predicts a 7% decline.
It comes as the latest Real Estate Institute home price index for January revealed a further slowing in New Zealand housing prices rise, with the number of houses sold falling dramatically.
The wind was out of the housing market’s sails, according to ASB senior economist Mike Jones.
“We’ve long been expecting a marked slowdown in house price inflation in this year, driven by the confluence of three major macro negatives – higher mortgage rates, tighter credit conditions and rising supply. These are now all in play.
“But the extent of the apparent credit constriction amounts to an extra handful of sand in the market’s gears that we didn’t previously allow for,” he said.
According to Jones, the downturn in property values will have an impact on those people who have been leveraging their expanding paper wealth to underpin their borrowing.
He said that the housing boom was a major factor in the increase in consumer spending.
“The fact that boom now seems to have run its course I think does have implications for consumer spending going forward.”
Jones stated that, even if home sales improved in February, demand was no longer outpacing supply.
“Separate data from realestate.co.nz confirm new listings are finally trending higher. This, coupled with softer sales, means unsold inventory across the country is around 40 percent higher than the lows in mid-2021.
“This slackening in the market’s supply/demand balance is eroding support for ongoing house price increases.”