Tough conditions push house hunters to wait for improvement
The latest QV house price index revealed a national decrease in home values by an average of 0.9% over the three months to June, with the average home value now at $916,285.
This is a larger decline than the 0.2% quarterly reduction reported in May. Despite this drop, values are still 2.8% higher than last year but 13.9% lower than the market peak in late 2021.
Auckland leads decline
Auckland experienced a significant 2.6% drop in home values this quarter, marking five consecutive months of negative growth.
Tauranga, Palmerston North, and Wellington followed with declines of 1.3%, 1.3%, and 1.2%, respectively.
Marlborough was the only major urban area to see an increase, with a 0.9% rise in home values.
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South Island stability
QV operations manager James Wilson (pictured above) noted the relative strength in the South Island, particularly in Invercargill and Dunedin, which saw growth of 1% and 1.3%.
However, Wilson cautioned, “Even Christchurch and Queenstown – two of our more ‘bullish’ housing markets in recent years – now experiencing little or no growth whatsoever.”
Market challenges
Wilson highlighted the challenges faced by potential buyers.
“Tough economic conditions are continuing to make it extremely difficult for potential purchasers to save a sizeable deposit for a home, secure finance from the bank, and service a mortgage with interest rates currently sitting around 7% and onshore inflation still biting,” he said. “Many house hunters are in hibernation now until conditions improve.”
Buyer and seller dynamics
With an abundance of listings and reduced competition, downward price pressure has spread across all market segments.
“Many residential property sales are now conditional on other sales occurring, causing chain reactions and extending sales periods or causing deals to fall through,” Wilson said. “Sellers are also having to adjust their price expectations in what has increasingly become a buyers’ market.”
Future outlook
Wilson expects home values to soften further in the coming months.
“There’s currently nothing to suggest that house prices will take off again in the near future, while there’s everything to suggest that they will remain flat to gently falling,” he said.
Wilson added that recent changes in the bright-line test and debt-to-income restrictions are unlikely to have a significant impact while interest rates remain high.
Click here for a regional breakdown of the latest QV house price figures.
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