Bigger than expected house value fall could quash hopes of market stabilisation - QV
Monday, 13 February 2023
Property values nationally fell by an average of 1.1% in January, probably quashing the industry’s hopes of a stabilisation, Quotable Value says.
The drop suggested a steeper decline than previously measured by other monitoring companies, and put the annual decline at 12.1%, the property valuing company (QV) said.
The reductions could throw cold water on hopes that the decline in house prices were slowing as buyers became more comfortable with higher interest rates.
QV chief operating officer David Nagel said it looked like the market had not hit bottom yet.
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“As a result, it seems many prospective buyers are being very cautious right now, waiting to see exactly how far prices will fall,” Nagel said.
“Others are finding it too difficult to obtain finance, or are unwilling to make such a commitment given the very high level of economic uncertainty right now.”
Most experts expect price falls to gather pace again if the Reserve Bank makes its predicted interest rate hike in February.
Nagel said at this point no one was arguing whether prices were going down, only the magnitude of the falls.
When asked for predictions over 2023, Nagel said he did not expect much to happen until after the election, with the market characterised by continued gradual slide in prices, and low sales volumes.
That was unless mortgagee sales started appearing, which could happen if a recession hit and job losses ramped up.
”The property market does not like uncertainty, so I don’t pick much happening until after the 14th of October.”
If an immigration friendly and investor friendly government came in, Nagel expected the market would recover more quickly.
Nagel said extreme weather events across the top of the North Island have done “less than nothing” to halt price declines.
He said house values in flood-stricken parts of Northland, Auckland, and Bay of Plenty were likely to recover fairly quickly, as was seen in Nelson following another extreme weather event last year.
“But the record amount of rainfall has been yet another obstacle for potential buyers and sellers to deal with at a time when house sales are already at an historic low.”
“It’s hard enough that people are already grappling with rising interest rates, inflation, and a still increasing cost of living.
“Now many people in the upper North Island have been having to deal with cleaning up after some pretty extreme weather.
“It’s little wonder that it’s been a slow start to the year for the residential property market. I’d suggest it’s probably going to stay that way for a while yet.”
The biggest falls
Palmerston North and Hastings posted the largest reductions 3.3% and 3% respectively for the three months to January 31.
The Wellington region also experienced significant declines in the past three months with an average house value reduction of 2.8%, and continued to top the list of average negative house value declines annually at 20.4%.
In the Auckland region house prices were 14.3% lower than the same time last year.
Auckland-based QV valuer Hugh Robson said demand for development land continued to drop off significantly, with many sites sitting vacant or attracting little interest from prospective buyers.
”Developers are playing a waiting game. Waiting to see what happens with interest rates, buyer activity, sale prices and the up-coming election.
“There are still many multi-unit developments under construction, of course, but these are developments that have been ‘in the pipeline’ for a while and the developers have no option but to complete them.”
Price falls had also hit Christchurch. The average house value had fallen 1.3% to $749,097 in the three months to the end of January.
Queenstown also recorded its first quarterly house price drop, with values falling an average of 0.7%.