House prices are still falling - despite lower mortgage rates

Thursday, 5 December 2024

The national median house price was down 0.4% to $800,795 in November, CoreLogic figures show.

Lower mortgage rates have not stopped the decline in house prices, with the national median price down for the ninth month in a row, CoreLogic says.

The property research company’s latest Home Value Index is out, and it put the national median at $800,795 in November, down by 0.4% from October and by 3.5% from the same time last year.

While the national median was 17.7% below the Covid boom peak, it remained 16.0% higher than in March 2020.

On a monthly basis, Wellington prices fell 1.0% to a regional median of $793,379 in November, while Hamilton and Auckland were down 0.5% and 0.4% to $711,016 and $1.05 million respectively.

Tauranga’s prices were flat on $895,662, but Christchurch’s inched up 0.1% to $671,344 and Dunedin’s were up 0.4% to $615,545.

CoreLogic’s Kelvin Davidson says the ability of lower rates to kickstart the market should not be underestimated.

CoreLogic chief property economist Kelvin Davidson said the market was still in a holding pattern, with prices not falling significantly, but not rising much either.

That was consistent with the current mix of supportive and restrictive market drivers, he said.

“Mortgage rates have fallen further lately and this pattern looks set to continue into 2025, and the ability of lower rates to kickstart sentiment and sales transactions, as well as prices, shouldn’t be underestimated.

“But it’s also important to note that there are several factors pushing in the other direction at present, such as the overhang of available listings and the weak labour market.”

The upshot was patchy price results around the country, with some markets faring relatively well in November, and others proving less resilient, he said.

In the Auckland and Wellington markets, which have been hit hardest in the downturn, other factors were also at play.

Abundant supply, due to existing properties listed for sale and the flow of new-build stock being completed seemed to be a significant restraint on prices in Auckland, he said.

Property sales should continue to rise to more normal levels, Davidson says.

'Wellington looks to be a good example of where job insecurity is outweighing the benefits to sentiment and households’ finances of lower mortgage rates.”

Davidson said regional price trends did flatten out to some extent in November, possibly due to the supportive influence of lower mortgage rates.

The rate of decline in the national median price had slowed from an average of 0.8% per month from April to August to an average of 0.3% falls over September to November, he said.

“That might signal a floor for prices is getting closer, but although the recent downturn might end soon, it won’t necessarily give way to a sharp or sudden upturn.

“The Reserve Bank is projecting a rise in house prices of around 7% in 2025. If correct, it’d be a fairly modest rise given how deep the downturn since late 2021 has proven to be.”

Underlying market drivers such as lower mortgage rates and a return to modest GDP growth should see property sales continue to rise, he said.

CoreLogic's modelling suggested that after less than 70,000 sales in 2022 and 2023, sales would end up at around 80,000 this calendar year, before rising to about 90,000 next year.

Westpac's Economic Overview suggests a brighter future for New Zealand, projecting over 2% growth in 2025. With mortgage rates falling, an 8% rise in house prices is anticipated as investors return to the property market.

That was still below average, but marked a return to more normal levels of activity, and would help to bring down the stock of listings on the market, and contribute to a rise in prices, Davidson said.

“But there are conflicting forces at work, and everyone is waiting for a clearer direction to emerge.

“We’re going into the holiday period now, so the market will be on hold, and it won’t be until we get to the February/March selling season that we get a better idea of what is going on.”

Property commentators have said market sentiment has turned, and ASB’s latest housing confidence survey supported that, with 20% of respondents saying now was a good time to buy, up from 8% in July.

But responses to economist Tony Alexander’s latest survey of real estate agents suggested while buyers were eyeing the market again, they did not feel the need for rapid decision making.

Alexander said agents reported buyers remained concerned about their incomes, but worries about interest rates had almost completely disappeared.

The agents also reported more sellers stepping forward to take advantage of the improving market, with a net 51% receiving more requests for property appraisals, he said.

“Higher demand is being met with higher supply. This is likely to be a key factor constraining the strength of price gains.”