The CoreLogic hedonic Home Value Index (HVI) showed that national median property values fell by a minor -0.1% in January, marking the fifth month in a row with limited movement. Indeed, after a cumulative decline of -4.1% over the six months from March to August, there has only been a further combined fall of -0.4% since then – a potential sign that we’ve pretty much reached a floor and that an eventual rebound in prices could be taking shape.
How Are the Main Centres Performing?
January saw mostly flat activity:
- Tauranga & Dunedin: +0.1% growth
- Auckland & Christchurch: -0.1% decline
- Hamilton: Stronger growth at +0.5%
- Wellington: The biggest drop -0.6%
The Capital is a good reminder that even in a broadly flat national market there can still be outliers, with the public sector cut-backs (and spillover impacts on wider feelings of job in-security) seemingly weighing on Wellington’s property prices.
Around ‘provincial NZ’, the early signs of some modest gains in property values that had started to become evident in November and December continued on into January.
- Invercargill: -0.2% decline
- Gisborne: -0.5% decline
- New Plymouth: A standout performer with a +0.9% increase
What’s Next for the Market?
To sum all of that up, the mini downturn through the middle part of last year now seems to have largely petered out (except in Wellington and to a lesser extent Auckland), and the market is probably poised to see growth again in 2025, both in terms of sales volumes and house prices. Clearly, lower mortgage rates will be a key factor behind that growth, especially as the Reserve Bank is expected to continue to cut the official cash rate in the next few months.
However, there’s still cause for caution about how strong or sudden an upturn in property values might be in 2025, especially with the unemployment rate still rising. In addition, the stock of listings available on the market generally remains elevated, and there are still affordability challenges for many buyers. On top of all that, the debt to income ratios are likely to start becoming a greater consideration in the next few months too – although the 20% allowance for high DTI lending and the new-build exemption mean the DTIs won’t stop the market in its tracks.
Overall, a sudden or strong upturn in property values across large swathes of the country still doesn’t seem particularly likely until the wider weakness of the labour market starts to turn around. Certainly, a more subdued upturn than we saw post-COVID looks likely.
Meanwhile, We’ll Be Watching Investors’ Activity Closely This Year.
On one hand, the continued slowdown in net migration continues to dampen overall population growth and marginal demand for property, especially in the rental sector. That potential reduction in the ease of finding a tenant might weigh on investor sentiment in the near term.
Even so, the tax rules – namely the shorter Brightline Test and 100% interest deductibility – have become more favourable for mortgaged investors again, and of course lower interest rates are shrinking the top-ups from other income that are typically required to sustain rental property cashflows. That suggests some extra demand from investors.
But other buyer groups will also tend to target property in a lower mortgage rate environment, and certainly conditions remain favourable for first home buyers too. A more liquid and faster-moving market may also help existing owner-occupiers to get their house sold and allow them to press ahead with the next purchase.
If you’d like to dive deeper into how property values are shifting in your area, CLICK HERE to access the latest CoreLogic House Price Index (HPI).
At The Mortgage Supply Co, we’re here to guide you every step of the way, whether you buying, selling, or refinancing. Reach out to our team today to discuss your unique situation and how we can support you in navigating the ever-changing property market!
