The "mixed" results provide a valuable indicator of the housing market's current "plateauing" trend, economist says
New Zealand’s housing market has reached a clear turning point, with stretched affordability, higher mortgage rates, and reduced credit availability causing growth rates to slow, or even turn negative, in many areas of the country, CoreLogic has reported.
CoreLogic NZ’s interactive Mapping the Market report, which tracks and compares suburb median levels, found signs of weakness in dozens of suburbs.
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Aotearoa's property market proved highly resilient in 2021, maintaining growth levels through lockdowns and border closures. But the CoreLogic report showed that 154 suburbs recorded falls in median values in the three months to February, while 581 posted gains of 1% or more for the same period.
Kelvin Davidson, CoreLogic NZ’s chief property economist, said this quarter’s Mapping the Market had been adjusted to focus on the three-month value change, instead of the previous, slower-moving 12-month change, to provide a more current and timely view of what’s been happening recently.
The CoreLogic economist said the altered comparison period neatly encapsulates the state of flux around market impacts, from changes to loan to valuation ratios, credit contracts and consumer finance laws, and the spread of Omicron.
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“The figures are pretty revealing,” Davidson said. “At the headline level, Mapping the Market shows an emerging weakness in parts of Auckland, Hamilton, Napier/Hastings, Wellington (especially Lower Hutt), Kapiti Coast, Dunedin and Queenstown. But conditions remain a bit stronger still in areas such as Tauranga, Christchurch, Rotorua, New Plymouth.”
Although it’s early days yet, David said this is broadly in line with what CoreLogic outlined in its vulnerability research last year, which highlighted the risks that can be evident in certain areas if affordability is too stretched, mortgage repayment problems are emerging, or investors start to sell, for example.
The latest Mapping the Market report covers 960 suburbs across the country. Figures showed that 60 of approximately 200 Auckland suburbs had a drop in median value of -2% or more in the three months to the end of February.
Prestigious areas of Auckland such as Remuera and Epsom have seen falls of -2.4% and -2.6%, which in dollar terms is equivalent to $68,100 and $66,200, respectively. Queenstown’s Lake Hayes has also declined -1.9%, or $45,500.
Davidson said there had been a similar weakening in more expensive suburbs of Hamilton and Wellington, but those markets’ price falls are more spread across both upper and lower tiers of property.
“It’s important to note the news isn’t all downbeat, there are still nine suburbs where prices have increased at least 10% in the past three months and another 90 suburbs have increased between 5% and 10% for the same period,” he said. “In fact, of the 960 suburbs covered, more than half (581) have still recorded price gains of at least 1% since November.”
Fordlands (Rotorua District) posted a 15.4% increase, to a median value of $457,850 – the highest percentage growth in the quarter. This was followed closely by Leigh in Auckland, which increased 15% for the period to $1,473,850.
Davidson said the quarterly results were best summed up as “mixed” and provided a valuable indicator of the housing market’s current “plateauing” trend.
“The figures aren’t surprising and are exactly what you would expect to see as sentiment begins to turn,” he said. “Our view is that a soft landing is still more likely than a major downturn, but the market will need to adjust to some economic uncertainty and higher mortgage rates. Buyers and sellers will naturally take some time to agree on where the new market normal lies, which will result in broadly flat housing prices at a national level – but falls in some areas offset by rises elsewhere.”
