Some kind of housing market upturn may occur in the second half of the year, economist says
The New Zealand property market is seeing a return of buyer demand with an increase in sales eating into the country’s housing stock levels, which is tipped to place a degree of upwards pressure on property prices in the coming months, according to a new report.
CoreLogic NZ’s Monthly Housing Chart Pack showed a 17% increase in residential sales figures in the 12 months to June, hot on the heels of the 8% annual increase recorded in May.
Kelvin Davidson (pictured above), CoreLogic NZ chief property economist, said sales volumes were bottoming out, as strongly indicated by two consecutive months of improved activity, measured across agent deals and private activity.
“It’s important to note that this increase has started from a low base, but as pent-up demand starts to emerge it’s likely we’ll see more increases in sales activity in the remainder of 2023,” Davidson said.
An improvement in sales volumes can be attributed to the combination of the broad peak in mortgage rates, the ongoing strength of the labour market, high net migration, slightly looser credit rules, as well as a tentative change in house-buyer confidence.
New listings, meanwhile, remained sluggish, down -30.8% in the four weeks to July compared to the same period in 2022 and were nearly 25% below the previous five-year average.
“The flow of new listings coming onto the market each week has remained sluggish month-to-month, as would-be vendors choose to ‘wait and see,’ given the uncertainty about how long a sale might take and/or the potential price achieved,” Davidson said.
The early upturn in sales is now eating into the total stock of listed property, particularly in key areas such as Auckland, Bay of Plenty, and Wellington.
“Arguably it remains a buyers’ market, with the national total stock of listings on the market still relatively high,” Davidson said. “However, there is also a downwards trend now evident for stock levels too, which may start to contribute to competitive price pressures.”
The CoreLogic House Price Index (HPI) for July showed the fall in values nationally increased its pace to 1.2% over the month, taking the annual downswing to 10.6% in the year to June.
The trend wasn’t unusual though, Davidson said, given the natural lag between sales and prices, with the second half of the year expected to hold some kind of housing market upturn.
“The end of the downturn doesn’t necessarily mean the market is destined for a sharp rebound,” he said.
“Housing affordability is still stretched, and caps on debt-to-income ratios loom large in 2024. The second half of the year still looks likely to hold some kind of housing market upturn – which will be good or bad, depending on your perspective.”
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