House price falls continue, but the decline won't last

Tuesday, 20 August 2024

There were 5806 house sales nationwide in July, an increase on last year and on last month, Real Estate Institute figures show.

House prices continued to fall last month, but sales activity improved and that suggests a positive turn for the market, the Real Estate Institute says.

The national median sale price declined 2.2% annually to $753,000 in July, and it was also down 2.2% from June, according to the institute’s latest figures.

Regional price movements were mixed, but prices in nine of the 16 regions were either down or remained unchanged on an annual basis.

Of the main centres, prices were down 4% in the Auckland region to a median of $950,000 and 1.4% in Christchurch to $650,000, but they were up 4.4% in the Wellington region to $765,000.

The institute’s house price index, which smooths out variations that come from sales figures, was down 0.3% from June, but up 0.2% on the same time last year. It was 16.7% below the 2021 market peak.

House prices continue to fall across New Zealand.

Real Estate Institute chief executive Jen Baird said there had been downward pressure on prices in most parts of the country this year, and sales had been lower than average as the cost of living, job security concerns and interest rates challenged many people.

But it seemed that sentiment was beginning to change as July had brought a new wave of buyer activity not typically seen in late winter, she said.

“The slight decline in interest rates in July, and a belief that there are more to come, appears to have encouraged buyer activity, as reflected in the increase in sales.”

While listings continued to increase, a rise in sales volumes meant the total number of properties for sale nationwide was down last month compared to June, she said.

There were 5806 sales nationwide in July, up 14.5% from 5070 at the same time last year and up 19.7% from 4841 in June.

Sales increased annually in 13 of 16 regions, and in eight regions sales counts were up by more than 20%. In Auckland and Wellington sales were up by 5.5% and 33.3% respectively.

Baird said the seasonally adjusted data, which indicated an increase of 5.4% in national sales compared to last year, reflected a market performing above anticipated levels for this time of year.

As more listings hit the well-supplied market, buyers were being slower to make decisions, and had led the average days to sell figure to increase by one day annually to 49, she said.

The Real Estate Institute’s Jen Baird says despite ongoing economic challenges, there are signs of potential improvement in the market.

“Despite ongoing economic challenges, early signs suggest potential improvement, indicating favourable conditions in the residential property landscape might be on the horizon.

“The recent cut in the OCR, and the strong signals of more reductions to come, will bring relief to households and will provide some confidence to buyers to act soon.”

Westpac senior economist Michael Gordon said the institute’s data showed sales picked up in July after a holiday-affected June, but the overhang of unsold homes was putting downward pressure on prices.

Renewed weakness in prices reflected the current logjam in the market, with separate Realestate.co.nz figures showing the stock of unsold homes continued to rise, he said.

“This suggests there’s a sizable gap between what buyers are willing to pay and what sellers are willing to accept.

“Falling mortgage rates will help to close that gap, though we expect that the initial impact will be in terms of clearing the backlog in sales. Any meaningful boost to prices is more likely to be a 2025 story.”

Kiwibank chief economist Jarrod Kerr said the market had seen a sharp correction from its peak, and was still struggling to make ground, with the institute’s price data revealing another fall in July.

House price rises are much more likely next year, Kiwibank’s Jarrod Kerr says.

But it was time to look to growth next year, he said.

“The good news is the Reserve Bank has decided to reduce the amount of monetary policy restrictiveness. And ultimately, they will head back to a neutral, Goldilocks, level for rates.”

He believed conditions were improving, and the decline in interest rates would lift heads, boost confidence – and entice investors off the sidelines.

Rental yields were still rising as rents were running at the fastest pace in over 30 years, while prices were still falling in large parts, he said.

“And the Government kept its promise to unshackle restraints. The ‘promised’ reintroduction of interest deductibility, shortening the Brightline test timeline, and possible watering down of the CCCFA, will entice investors.”

Kerr said forecasting was as much an art as it was a science, but the market was much more likely to see price gains over 2025.

The surge in migration, the worsening demand/supply imbalance, and the new Government would all have a role, while interest rates would play a larger role from now, he said.

“Our best guess is house prices will rise by 5% to 7% over 2025. Call it 6% to sound precise.”

Supply was the issue, he said. “It is increased, or elastic supply that will better balance our housing market. It’s not about limiting demand.”