Signs of a Market Shift
The CoreLogic hedonic Home Value Index (HVI) showed that national median property values rose by 0.3% in February, which was the first meaningful change in either direction for the past 5-6 months, and the strongest rise since a 0.5% gain back in January last year. This is the clearest sign yet that 2024’s ‘mini downturn’ has come to an end and that 2025 will likely see modest growth.
Main Centres Show Growth
February saw stronger performance in almost all major centres:
- Christchurch and Dunedin – Up 0.6%
- Hamilton – Up 0.5%
- Auckland – Up 0.3%
- Wellington Region – 0.1% (a modest but notable shift from the average 0.7% declines in the prior 11 months)
Regional Markets: A Mixed Picture
Around the regions, property values were still generally rising, albeit with a bit of patchiness – a reminder that even though the broad trend now seems to have turned, not everything will move at the same speed or direction from month to month.
- Invercargill – Up 0.9%
- Queenstown – Up 0.8%
- Whanganui – Down 0.6%
- Hastings – Down 0.4%
Why is the Market Turning?
Taking a step back, none of this should be too surprising. After all, mortgage rates have fallen sharply since around July/August last year and that always tends to boost house prices at some stage – we’ve seen it in the past and will no doubt see it again. Certainly, many new borrowers are now seeing fixed rates of 5% or less, and existing mortgage holders will also be enjoying the benefits of rolling off their old rates of 7% or more and down to the new lower levels.
Constraints Still in Play
Of course, there are still some restraints out there too. Granted, sales volumes are rising, and this would ordinarily start to reduce the available stock of listings on the market, also helping to support house prices. But sales started from a low base and are still below normal/average for the time of year, and combined with a continued steady flow of new listings coming onto the market, stock levels if anything have risen even further so far in 2025 – from an already high level.
An additional limiting influence on house prices is of course the subdued underlying economy and soft labour market. Admittedly, it’s encouraging that some timely economic indicators have started to perk up, suggesting that the recession has ended. But the continued economic sluggishness will still be weighing on households’ confidence to fully return to the property market again.
In addition, credit availability is still restrained to some degree by the internal serviceability test rates at the banks. From here on, even if/when those test rates fall further, this is the time we’ll see debt to income ratio limits start to become a more significant consideration. DTIs won’t stop the market dead in its tracks, but will tend to limit medium-term house price growth, especially as some investors struggle to expand their portfolios as quickly as they otherwise might have done.
What’s Next for Property Prices?
All in all, the latest index confirms that stronger anecdotes from the past few months have now translated into the ‘hard data’, and over the next 6-12 months property values seem likely to trend higher – an expectation we’ve had for quite some time now. But the upturn may well be slow and patchy by past standards.
Of course, a muted upturn could well be a ‘good thing’, allowing aspiring purchasers (both first home buyers and investors) to enter the market without undue pressure and letting existing owners achieve a deal more quickly before moving on to the next purchase. There’s always two sides to the coin in the property market.
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!
