First ‘meaningful’ house price rise in over a year

Thursday, 6 March 2025

The average national house price was up 0.3% to $807,164 in February, CoreLogic says.

The New Zealand housing market’s “mini downturn” has come to an end, with national house price growth now on the rise, CoreLogic says.

Average house prices nationwide were up 0.3% to $807,164 in February, according to the property research company’s latest Home Value Index. On a quarterly basis, they inched up 0.1%.

It came off the back of monthly and quarterly price declines in January, and last year’s soft market which saw prices decline 4.1% from March to September.

The average national house price was now 16.9% lower than the Covid market peak in early 2022, but 17.1% above the pre-Covid price of $689,353 in March 2020.

CoreLogic chief property economist Kelvin Davidson said February’s result was the strongest price rise since a 0.5% gain in January last year.

The Reserve Bank has cut the official cash rate to 3.75%, the lowest in two years. Banks have already lowered home loan rates, with further reductions expected. Homeowners and retailers could benefit, but economic uncertainty remains.

While the rise of 0.3% was fairly modest by past standards, it represented the first meaningful increase for more than a year, he said.

“It was always likely that the house price falls in 2024 would come to an end at some stage in early 2025, given the extent of interest rate cuts since July or August last year.”

The Reserve Bank started cutting the official cash rate (OCR) in August, and interest rates fell from the 7.5% range to the low 5% range. All the major banks currently offer a 4.99% two-year fixed rate.

But the overall growth figure was masking local market variability, with some areas recording price declines, Davidson said.

On a monthly basis, prices in Christchurch and Dunedin rose 0.6% to averages of $690,364 and $616,031 in February, while in Hamilton and Auckland they were up 0.5% and 0.3% to $742,670 and $1.06 million.

But Wellington’s prices crept up just 0.1% to $791,879, and Tauranga’s were down 0.2% to $907,034.

Outside the main centres, monthly price performance was patchy, with Invercargill, Queenstown, and Gisborne all up by more than 0.5%, but Whanganui and Hastings dropped 0.6% and 0.4% respectively.

It was a reminder that even though the general trend seemed to have turned, not everything would move at the same speed or direction from month to month, Davidson said.

The coming upturn in the housing market will be more muted than in the past, CoreLogic’s Kelvin Davidson says.

“With listings still abundant and debt-to-income ratio limits set to be a restraint if and when banks’ serviceability test rates fall further, a rampant boom in house prices in 2025 seems unlikely.”

But conditions now appeared in favour of gradually rising prices over the medium term, with mortgage rates having fallen, and better news on the underlying economy and labour market, he said.

”We’ve already seen that mortgaged investors are eyeing up the property market again after a few quieter years in 2022 and 2023.

“In a busier overall market, we still anticipate first home buyers having plenty of opportunities to get on the ladder, especially with prices still considerably lower than the post-Covid peak in much of the country.” “

It meant there were likely to be more property sales this year than last, and prices would rise, but the upturn would be more muted than in the past, he said.

Another indication that the housing market was starting to turn came in Stats NZ’s latest building consent data, which was released on Wednesday.

It showed 2203 new homes were consented in January, up 11% from January 2024, and that annual increase was the largest since March 2022.

New housing development is expected to turn higher in the latter part of 2025, Westpac’s Satish Ranchhod says.

Infometrics chief forecaster Gareth Kiernan said the rebound in consent numbers in January supported the view activity would hold between 33,000 and 35,000 consents a year over the next 18 months.

It also aligned with recent anecdotal evidence from the industry that enquiry levels were picking up and expectations that sales activity related to residential construction would stabilise, he said.

“We see enough signs in the market that consent numbers have found a floor and will remain relatively stable throughout this year.”

Westpac senior economist Satish Ranchhod said new housing development was expected to begin turning higher in the latter part of the year as the housing market strengthened.

The Reserve Bank’s OCR cuts would support a gradual recovery in the housing market and house prices over the course of the year, he said.

“And that combination of lower borrowing costs and a strengthening housing market will eventually support a lift in new housing development.”