Modest recovery amid challenges
New Zealand’s property market shows modest recovery in sales volumes, but activity remains subdued with elevated listings and flattening prices, CoreLogic NZ reported.
Sales activity increases, but market remains subdued
Despite a 9.2% annual increase in sales activity in May, the broader picture indicates persistent challenges.
According to CoreLogic NZ’s June Housing Chart Pack, sales activity increased for the 13th consecutive month in May to 6,789 transactions.
However, “at 73,181 deals in the past 12 months, sales are still a long way below the normal levels of about 90,000 per year,” said Kelvin Davidson (pictured above), CoreLogic NZ chief property economist.
Price dynamics and inventory levels
Davidson said that new listings are adding to the overall inventory, giving buyers an advantage in price negotiations.
The CoreLogic House Price Index (HPI) showed a slight decrease in prices for Auckland, Wellington, and Tauranga in May.
“This suggests a broad flattening of prices across the market,” Davidson said.
Total stock is 15.8% higher than the same time last year and 27.6% higher than the five-year average.
Buyer dynamics and market shares
First-home buyers continued to represent 25% of purchases, benefiting from lower prices, less competition, and access to low-deposit finance. Relocating owner-occupiers have maintained a stable market share at around 26%.
“Movers were relatively quiet during the pandemic years, but now that listings have lifted, it’s possible owner-occupiers are acting on pent-up demand due to need or want,” Davidson said.
Impact of regulatory changes
Regulatory changes such as the shortening of the Brightline Test, reinstatement of mortgage interest deductions, and the upcoming debt-to-income ratio caps are expected to have limited short-term impact.
“In an environment where mortgage rates remain high and aren’t set to fall materially for a while yet, this year remains pretty underwhelming for the property market, despite a raft of policy changes,” Davidson said.
Outlook and economic factors
Davidson noted that the market’s recovery in 2023 was driven by a resilient labour market and strong net migration, which has now peaked.
“The more recent loss of momentum is a reflection of prolonged affordability pressures, persistent high mortgage rates, an increase in listings on the market, and a turning point for unemployment,” he said.
Tax cuts and LVR rule changes are unlikely to significantly impact transactions or prices in the current high mortgage rate environment.
CoreLogic’s June housing chart pack highlights
- New Zealand’s residential real estate market is worth $1.63 trillion.
- A 1% increase in average property values over 12 months to May.
- Dunedin and Hamilton saw the strongest performance, with 2.1% and 1% increases respectively in the three months to May.
- May sales volumes increased for the 13th consecutive month.
- Total stock on the market increased by 15.8% compared to last year.
- National rental growth has slowed to 3.8% in the year to May.
- Gross rental yields remain at 3.2%, the highest level since late 2020.
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