Market remains subdued
Amidst a raft of policy changes, New Zealand’s home values continued to decline in June.
CoreLogic’s House Price Index fell 0.5%, marking the largest drop since June 2023 and continuing the recent trend of minor declines.
Annual house price rise stalls
Over the past 12 months, house prices have increased by 1.8%, adding $16,000 to homeowner wealth. However, the temporary rise seen between September 2023 and March 2024 has stalled due to high mortgage interest rates.
Each main center recorded flat to falling prices, with Christchurch and Dunedin showing no change in June.
Nick Goodall (pictured above), CoreLogic NZ head of research, described the past year as a “dead cat bounce,” with confidence potentially misjudging the trajectory for mortgage interest rates.
“Inflation has remained sticky, particularly domestically,” Goodall said. “It looks as though interest rates could stay higher for longer, restricting borrower numbers and lending amounts.”
Lending and affordability challenges
Recent lending figures from RBNZ showed a significant portion of new residential mortgage lending from borrowers switching bank loan providers, reflecting the competitive lending environment.
“This change illustrates the persistent low levels of real estate transactions as a source of new mortgages for banks,” Goodall said.
Auckland experienced a notable decline, with prices down 1.2% in June, resulting in a quarterly fall of 2.6%. Goodall attributed Auckland's weakness to affordability challenges, with 55% of average income required to service a typical new mortgage, compared to 43% in Dunedin.
“It’s clear affordability remains an issue across the Super City,” Goodall said.
Regional variability and market outlook
Regional house price indices showed limited growth, with Invercargill (2.1%) and Queenstown (1.2%) as exceptions. Invercargill remains the most affordable urban area, while Queenstown is the priciest.
Goodall said that upcoming regulatory changes are unlikely to significantly impact the market.
“The 1st of July signals a raft of regulatory changes, but they're unlikely to have a significant impact on the market either way,” he said.
Looking ahead, Goodall emphasized the importance of the Reserve Bank’s next meeting in mid-July.
“Mortgage holders should continue to prepare for similar levels of interest rates for the rest of the year, and homeowners for the market upturn to underwhelm, especially with job security now declining,” he said.
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