House prices drop despite big increase in activity

Tuesday, 10 September 2024

House prices have not gone up following interest rate declines, new data shows ‒ but there is no doubt market activity has increased, agents say.

Quotable Value’s (QV) latest House Price Index is out, and it shows the cost of the average home nationwide dropped by 2% to $905,357 over the three months to the end of August.

The pace of quarterly price decline had picked up from 1.9% in July and 0.9% in June, and it has left the national average about $20,000 lower than $925,461 at the start of the year.

QV operations manager James Wilson said prices were now effectively flat overall for the calendar year, having continued to slowly ebb and flow throughout the first eight months of 2024.

That reflected a market that had been severely constricted by strong economic headwinds, including rising unemployment, credit constraints and high interest rates, he said.

“Now that interest rates are finally coming down, we are seeing renewed interest in housing generally across the country.”

But while agents and valuers were reporting a pick up in market activity, that had not filtered through to prices yet, he said.

Twelve of the 16 regions monitored had quarterly price falls, with the six largest centres all recording declines.

In Auckland and Wellington prices fell 2.8% and 3% to $1.23 million and $845,718 respectively, and August marked the seventh month in a row Auckland’s prices dropped.

Prices in Hamilton and Tauranga were down 1.7% and 1.5% to $774,685 and $1.01m, while in Christchurch and Dunedin they declined by 1.3% and 1.1% to $760,929 and $639,070.

Napier had the biggest price fall at 4%, to $734,922, while Rotorua’s prices bucked the trend and rose 8.7% to $723,488.

Wilson said it would take some time for lower interest rates to impact on prices, and an excess of homes available for sale, particularly in the largest cities, was also keeping a lid on them.

But many mortgage brokers were saying their phones were ringing hot, and it looked as though people were getting their ducks in a row to purchase, he said.

“It’s like they are waiting for the OCR and interest rates to come down further before they make a move, but they want to be ready. The mindset has shifted, and it’s almost like pre-Fomo (fear of missing out) now.”

Real estate agent Mark Honeybone, from Harcourts Property Ventures in Auckland, said all the agents in his office were reporting a significant increase in enquiries and viewings.

After a long quiet period the market started to improve about a month ago when talk of an OCR cut began, he said.

“Prior to the OCR cut, I went for seven weeks without an unconditional sale, but in the last three weeks I’ve had eight.

“In four of those sales, the properties had been sitting on the market for three months before the cut, and a couple of them subsequently sold in multi-offer situations.”

He was now feeling more optimistic about the market, but said it would take a while for prices to start moving up across the board.

Some good sales were happening though, including one last week where the property had a reserve of $1.4m and it sold for $200,000 above that, he said.

“But some areas, such as Māngere and Papakura, still have a lot of stock for sale, and that has an impact on prices.”

Bayleys Real Estate Howick branch manager Lauren Mirabito agreed activity had improved, and said they had seen a “massive” increase in open home numbers.

A few months ago it would have been good to see eight groups at an open home over a weekend, but their listings were now getting an average of 18 groups through, and one listing had 68, she said.

“It is translating into sales. Normally, we have about 110 listings on our books, and right now we have 77, so we’ve cleared quite a bit of stock.

“After the OCR cut, interest rates went down, there was more buyer confidence, an element of Fomo started to appear, and people have acted.”

There were more multi-offer situations, and prices were beginning to move, she said.

“We are not seeing massive bargains for buyers, and some are digging their heels in. But I’d say there is an increasingly balanced market with buyers and sellers willing to talk, and that’s resulting in prices which are fair market value.”

QV’s Wilson said the increase in activity meant that the stock on the market would be absorbed, and demand would start to outweigh supply.

But that could take some time, even as increasing numbers of buyers came out of the woodwork, he said.

That was because the prevailing buyer mindset was one of cautious optimism, while even more real estate listings were expected as the real estate selling season traditionally ramped up in spring.

“More investors will look to sell properties following the changes to the bright line test in July, and sellers who pulled their listings after failing to sell earlier in the year may look to try again now there’s an uptick in activity.”

This would continue to promote soft-to-flat price conditions nationally in the short term, he said.

“I don’t think we will see prices suddenly take off and surge upwards again any time soon.”