House prices dropped nearly 2% in the last three months

Tuesday, 13 August 2024

The cost of the average home nationwide was $909,517 in July, QV says.

Auckland house prices have been heading down for six months, and that’s driving an acceleration in price falls nationwide, a property researcher says.

The cost of the average home nationwide dropped by 1.9% to $909,517 over the three months to the end of July, according to the latest Quotable Value (QV) House Price Index.

While the national average remained 2.3% higher than at the same time last year, the pace of quarterly price decline has picked up from 0.9% in June and 0.2% in May.

There were quarterly price falls in 13 of the 16 regions monitored, and the largest was in Whangarei where the average was down 3.9% to $716,214.

But it was the Auckland region’s 3.4% quarterly decline, which left the regional average at $1.23 million, that was most significant.

House prices continue to fall across New Zealand.

That is because the Auckland market is the biggest in the country.

QV operations manager James Wilson said Auckland was always a litmus test for the broader market, because it tended to rise first and then drop first, and often fastest.

The mini-surge in the market and prices that occurred in October last year was fuelled out of Auckland when supply was quite tight, he said.

“But then there was a rush of listings to market and the supply situation reversed overnight. At the same time, the mindset around interest rates changed to a view they would hold higher for longer.

“Existing owner-occupiers, the mums and dads if you like, who are the biggest buyer group, decided it was time to pause, and other economic concerns, such as job security, came into play for many potential buyers.”

Those market changes had been playing out in Auckland, but had taken longer to show up in other markets, he said.

“Now they are, and activity in the market is generally soft around the country, and that is impacting on prices.

Auckland’s house prices have been falling for six months, QV’s figures show.

“But the big takeaway for me is that price declines have accelerated, and a big part of the reason why is that they are being driven by the biggest urban areas, particularly Auckland and Wellington.”

Auckland’s prices had been falling for six months in a row, and the regional average in July was 0.4% down on $1.24m at the same time last year.

In the Wellington region, prices have declined for four consecutive months, and over the July quarter they fell 1.9% to an average of $856,946. But that was still 4% higher than the average in July last year.

Christchurch prices have now fallen for two months in a row, while they were down 0.7% over the quarter to an average of $760,981 in July.

Marlborough, Invercargill and Queenstown bucked the trend to record small quarterly price increases of 0.6%, 0.4%, and 0.3% to averages of $714,898, $483,715, and $1.83m respectively.

Wilson said challenging economic conditions, persistently high interest rates, and the imbalance between the number of listings and the shallow pool of buyers who are able to buy was maintaining downward pressure on prices.

There is growing optimism interest rate relief could be on the horizon, QV’s James Wilson says.

“But also with owner-occupiers and investors sitting on the sideline, first home buyers are most active and they are buying in the cheaper, entry level part of the market. So softer prices are the result of what is selling too.”

Anecdotally, there were reports of busier open homes and more enquiries in July in some areas, but agents had told him there were lots of “cheeky” offers and sellers were not receptive to them, he said.

“Even when the market is soft, that doesn’t mean that nothing is happening. It is just a matter of if the offers made get accepted and go ahead, and the data shows sales are still down.”

But there was growing optimism that mortgage rate relief could be on the not-too-distant horizon, and potential buyers would be paying close attention to the Reserve Bank’s OCR call this week, Wilson said.

“Markets don’t tend to respond too well to uncertainty. So, when we do eventually get a firmer steer on when we can expect mortgage rate relief, it may signal a shift in sentiment, which could spark some life in certain parts of the market.”

Even if that happened, it was not expected to trigger “a rush back to the races” in prices, and in the meantime, he expected prices to remain flat to gently falling, he said.