Further declines predicted for 2023
New Zealand’s property market downturn worsened in December, falling an additional 0.2%, bringing the total national decline for the 2022 calendar year to -5%, according to CoreLogic.
The real estate data analyst’s latest House Price Index shows the average house price at $956,000 in December, after starting the year at $1,007,000. This is the largest annual decline since June 2009 (-6.4%), when the market was still in retreat from the GFC.
CoreLogic NZ head of research Nick Goodall (pictured above) said it was a significant turnaround after the market grew by 27.6% in 2021.
“The CoreLogic HPI indicates New Zealand’s property market peaked in March with the first monthly fall in prices recorded in April,” Goodall said.
“Since then, we’ve seen the rate of decline accelerate as the official cash rate climbed higher and affordability constraints kicked in. However, during the last quarter of 2022, there were some signs of light at the end of the tunnel as expectation of further interest rate increases diminished.”
Goodall said the positive signs were ultimately extinguished following the persistently high CPI inflation result for Q3 (7.2%), which brought a refreshed and much higher OCR forecast peak, along with increased economic uncertainty.
“We don’t expect this to signal the bottom of the downturn by any means, particularly given the outlook for further rate increases in the first half of this year. This will restrict borrowing capacity and until rates stabilise, we should be prepared to see further declines in value this year,” he said.
“During COVID-19, New Zealand recorded a national increase in average house prices of 41% over the 19 months from trough (August 2020) to peak (March 2022).”
CoreLogic House Price Index – National and Main Centres Change in Values
|
Location |
Month |
Quarter |
Annual |
Average Value |
|---|---|---|---|---|
|
New Zealand |
-0.2% |
-2.1% |
-5.0% |
$956,383 |
|
Auckland |
-0.3% |
-2.4% |
-5.1% |
$1,354,801 |
|
Hamilton |
-0.2% |
-2.4% |
-5.4% |
$836,018 |
|
Tauranga |
0.1% |
-2.7% |
-5.7% |
$1,074,336 |
|
Wellington |
-0.3% |
-5.0% |
-16.9% |
$935,215 |
|
Christchurch |
-0.4% |
-0.6% |
1.0% |
$751,901 |
|
Dunedin |
-0.2% |
0.1% |
-9.5% |
$646,156 |
Goodall said the moderate scale of value change was relatively consistent across the main centres with the monthly variation ranging from a 0.1% increase in Tauranga to a -0.4% fall in Christchurch.
“In Dunedin, the -0.2% fall in December marks the fourth month in a row where values have hardly moved, which sees the average property value now 0.1% higher than three months ago,” he said. “With values -9.5% below the same time last year and recording consistent monthly changes in value, the market may be closer to finding a floor in Dunedin.”
Despite Christchurch experiencing the (marginally) worst performance of the main centres in December, it remained the most robust centre when looking at a longer period. The average value at the end of 2022 was 1.0% above the same time a year ago.
Goodall said homeowners in the Wellington area would welcome the news that the rate of decline in values had moderated, after average property values fell 16.9% over the calendar year.
In December, CoreLogic NZ’s interactive Mapping the Market Tool showed 776 of the 948 suburbs analysed had a drop in median values between September and December 2022, with the suburb of Kawakawa in the country’s far north recording the highest percentage growth rate, up 6.5% to a median of $469,550.
“Only 66 suburbs, or about 7%, recorded a growth rate of 1% or more in the past three months, with many of those located in the country’s rural and more affordable southern districts,” said Kelvin Davidson, CoreLogic NZ’s chief property economist.
“These figures are the culmination of the lagged impact of rate rises, record inflation and other economic influences having an impact on the market. We knew it was coming and it’s been interesting to see it play out, with downward momentum widespread, but almost universal in our city centres with few areas able to escape the weakness.”
Tim Kearins, owner of Century 21 New Zealand said he was expecting more interest rate stability this summer and 2023 is "the perfect time to buy" a home. He told NZ Adviser the stabilising of the OCR “won’t make it any easier for many young Kiwis to secure finance in the first place”.
In summarising 2022’s performance, Goodall said the market’s volatility could suggest some buyers were trying to pick the bottom of the market.
“Anyone who bought in the last few months would likely have expected further falls, however there was a feeling of relative positivity surrounding the market prior to the higher-than-expected Q3 inflation figure being released,” he said.
“No one expected the OCR to have fully peaked though, so buyers were knowingly entering a market with further to fall. Further information has led the Reserve Bank of New Zealand to forecast inflation will remain stubborn, thus necessitating a higher peak to the OCR and ultimately a recession. This probably means a continued constraint on property demand and subsequently further value falls for longer.”
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