Housing downturn unlikely to end soon
New Zealand house prices slumped -4.1% in the three months to September, one of the worst periods for national value falls on record, with the housing downturn unlikely to end soon.
This was according to CoreLogic New Zealand, which said the recent quarterly decline is only marginally better to the 4.4% drop seen in the wake of the Global Financial Crisis 14 years ago.
“As interest rates have increased, and credit is harder to attain, the housing market is firmly in retreat following an exceptional period of growth,” said Nick Goodall, head of research. “Despite the rate of decline easing in September, it’s probably too early to suggest the housing market has moved through the worst of the downturn.”
Read more: Why NZ's housing market downturn could be a "warning to the world"
Property values continued to decline across all six main centres in September, with Wellington continuing to experience the weakest performance. Values across the broader capital area (including the Hutt and Porirua) fell -2.5% over the month and 8.5% over the quarter, to be -9.1% below the same time last year.
With OCR expected to rise further into 2023 due to strong economic performance and persistently high inflation, Goodall said the hikes would likely prolong current downturn. Restrictive credit rules, such as tight LVR, are also likely playing a role.
Read next: Reserve Bank makes its next rate call
“Increases to the OCR may not pass on fully to mortgage interest rates, with competition strong among the banks and forecast increases in the rate also already ‘priced in’ to short term rates,” Goodall said. “However, with expectations of ‘more increases to come’ it may be premature to expect the end of the downturn to be here any time soon. That said, as long as unemployment remains low, the market is likely to be in an orderly correction rather than outright slump.”
