The Market Weakness Persists Into August
There was very little sign of the current weak patch for property values coming to an end in August’s data, with the CoreLogic hedonic Home Value Index (HVI) showing a further 0.5% drop – taking the total decline from February’s ‘mini peak’ to 3.7% nationally. With median values now sitting at $811,583, that 3.7% drop translates into a fall of around $31,100.
The falls in values in August were seen across most parts of the country, and certainly within many of the main centres.
- Auckland dropped by a further 1.0%, taking its recent declines to a total of 6.0%
- Hamilton was down by 0.8% in August.
- The falls in Tauranga, Dunedin, and ‘wider’ Wellington (cumulated across Porirua, Lower & Upper Hutt, and Wellington City) were a bit more modest.
- Christchurch actually edged up by 0.2%.
Looking slightly longer term, the divergences in some of the main centres are still pretty striking. For example, Auckland’s values are now around 22% lower than the post-COVID peak, and ‘only’ about 9% higher than pre-COVID levels, with Wellington’s figures almost identical. But in Christchurch, values have dropped by a much smaller 7% since the post-COVID peak, and are still more than 40% higher than the pre-COVID mark.
In some of our other main urban areas, there are also quite stark differences. In August alone:
- Invercargill and Whanganui both saw values rise by 0.7% (and Queenstown by 0.5%)
- Whangarei dropped by 0.6% and Palmerston North by 0.7%.
- Meanwhile, compared to the post-COVID peak, Invercargill and New Plymouth, as examples, are down by less than 3%, yet the falls have been around 20% in Napier and Gisborne.
In terms of the drivers that underpin these patterns, it’s no major surprise that values have generally been sliding lower since around February. Granted, interest rates are now falling, but that’s taken a while to arrive, and of course, they’re still quite high for new borrowers, let alone those existing mortgage holders who might have previously fixed at 7% or above.
Meanwhile, housing affordability is still pretty stretched (even after price falls since late 2021), there are a lot of listings out there – giving credit-approved buyers the upper hand when it comes to negotiation – and of course the labour market is weakening too. Even for those people who keep their jobs, the feelings of insecurity can still curb their activity in the housing market.
Looking ahead, however, a short-term pick-up off the back of lower interest rates couldn’t be ruled out. After all, this is certainly what we’ve seen in the past when households feel happier (and wealthier) due to lower mortgage costs. And there’s not going to be much impact from the debt to income (DTI) ratio caps in the near term either.
However, our estimate is that DTIs could start to become more binding when ‘typical’ mortgage rates drop to around 5.5% or less. This could be the middle of next year, or maybe even sooner. Accordingly, looking over a 12-18 month horizon for the housing market, it’s difficult to see a really strong or sustained boom kicking off again.
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). This comprehensive report provides invaluable insights into property value changes across New Zealand and can help you make informed decisions.
The Mortgage Supply Co is here to guide you through every step of your property journey, whether you’re looking to buy, sell, or refinance. Reach out to the team today to discuss your unique situation and how we can help you navigate the ever-changing property market!
