‘Sinking feeling’ for home owners as prices fall

Friday, 14 June 2024

The average national house price dropped 0.2% to $923,713 over the three months to the end of May, QV says.

Decreases in house prices are picking up pace with the market stuck between a rock and a hard place, Quotable Value (QV) says.

The cost of the average home nationwide dropped by 0.2% to $923,713 over the three months to the end of May, according to the valuation company’s latest House Price Index.

It was the first quarterly price decrease since July last year, although it was small and the average national price was still 3.9% higher than it was at the same time last year.

QV operations manager James Wilson said the average rate of price growth either decreased, or the rate of decline increased, in nearly all of the 16 urban areas monitored.

“But nearly all the reductions were relatively modest.”

Auckland had the biggest quarterly price decrease at 1.4%, which marked its fourth month of negative growth in a row and left the regional average at $1.26 million.

Decreases were also recorded in Tauranga, down 1%, Hamilton, down 0.4%, Wellington and Palmerston North, down 0.3%, and Nelson, down 0.2%.

Quotable Value house price index for May 2024.

But Wellington’s quarterly price reduction, which left the regional average at $872,178, was its first since the end of winter last year.

Some regions did have reasonable quarterly price increases, with Invercargill’s prices up 3.2% to an average of $486,276 and Rotorua’s up 2.5% to $665,278.

Dunedin, Christchurch, Napier and New Plymouth had increases of at least 1%.

Wilson said property owners might look at the latest figures and start getting “that sinking feeling” again, while first-home home buyers might look at them with renewed optimism.

“But the reality is a market that is stuck between a rock and hard place, at least until mortgage pressure eventually lifts.”

Prices were bobbing up and down from month to month and quarter to quarter, but they were not moving one way or the other with any real conviction, he said.

The market had largely stalled, and the seasonal slowdown had set in, with both buyers and sellers continuing to grapple with difficult economic conditions, he said.

The market has stalled as buyers and sellers grapple with difficult economic conditions, QV’s James Wilson says.

“Against this challenging backdrop, an excess of housing stock on the market is maintaining downward pressure on prices. So those who are in a position to buy right now, have the upper hand.

“Purchasers are spoilt for choice and appear to have time on their side, with nothing to suggest that house prices are going to take off again soon.”

Saving a deposit and getting a mortgage was difficult in the current environment, he said.

Recent regulatory changes, such as the axing of the First Home Grant scheme and the implementation of new debt-to-income restrictions (DTIs) from July 1, would also make it harder for some buyers.

But Wilson said he expected the market to stay flat to gently softening throughout winter.

“We may see more listings come onto the market due to the changing bright-line test restrictions, which will offer buyers even more choice.

“Otherwise, higher mortgage rates are already severely restricting buyers, so changes to loan-to-value ratios and the introduction of DTIs won’t have a material effect in the short to medium term.”

Real estate agents report fewer people are attending open homes and auctions.

Interest rates remained the dominant restraining factor, he said.

The latest figures from CoreLogic and Trade Me Property also showed that price growth was decreasing, while economist Tony Alexander’s latest survey of real estate agents revealed a weaker market.

In Alexander’s survey, agents reported that fewer people were attending open homes and auctions.

A net 55% of agents thought prices were falling in their area, down from a net 37% last month and 26% two months ago.

Alexander said that, as with open homes and auctions, there had been a clear deterioration since early this year with strength also ebbing before the start of 2024.

“That deterioration likely reflects new worries about employment alongside new hits to the cost of owning a property as council rates and insurance premiums have soared with promises of further rises to come.”

For the second month in a row agents reported next to no “FOMO” (fear of missing out) on the part of prospective buyers, he said.

“Only 3% of agents say there is FOMO. This result is unchanged from last month and equal record lowest. Buyers feel no need to hurry and make a purchase as they don’t feel there is any cost to waiting.”