2023 is shaping up as a year of two halves, economist says
The New Zealand property downturn has continued in April, with average values down a further 0.6%, fresh figures from CoreLogic showed.
CoreLogic’s monthly House Price Index (HPI) showed that at $928,656, average values nationally were 10.3% lower than the same month last year and were $115,000 below their March 2022 peak, but still roughly $200,000 higher than the pre-COVID level.
Kelvin Davidson (pictured above), CoreLogic NZ chief property economist, noted that the 0.6% fall in April was smaller than the drops of about 1% in each of February and March, and less than the average monthly fall in this cycle so far of 0.9%.
“The slowdown in the rate of decline could be signalling a near-term floor for house prices, which would be consistent with some shifting trends in key drivers,” Davidson said.
“The generalised peak for mortgage rates could start to increase buyers’ confidence in the coming months, while employment remains high, alongside a slight decline in available listings, and rising net migration.”
Davidson said the looming easing of LVR restrictions could also impact values – an effect which could be amplified if investors try to buy before debt-to-income ratio limits are launched next year.
The latest tweaks to the Credit Contracts and Consumer Finance Act (CCCFA), which takes effect this month, could enable a few more borrowers to enter the market, due to a less stringent approach to expenses when the bank is assessing the loan applications.
“Of course, should New Zealand fall into a recession there will be an alternative impact on the housing market, and we can’t ignore the prospect of negative equity either,” Davidson said.
“CoreLogic’s latest valuation estimates for individual properties shows approximately 2,500 recent first-home buyers could owe more than the value of their property. Buyers in Auckland and Wellington make up the bulk of those properties.”
Property market outlook
Davidson said 2023 is shaping up as a year of two halves – from a weak start to a possible end to the downturn later in the year.
“I wouldn’t equate a potential near-term stabilisation for housing prices with the immediate start of another upturn,” he said. “After all, affordability is still stretched, interest rates may not fall sharply anytime soon, and debt-to-income ratio limits from March next year could restrain a market recovery. I could readily imagine relatively flat house prices into 2024, possibly longer…
“If we’re correct in our outlook and house prices stay broadly flat at the new lower level for at least one to two years, there’ll still be a period where housing affordability can improve, wages will catch up a little and I think most people would see that as a good thing.”
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