Buyers take ‘noticeable’ step back from housing market

Tuesday, 9 July 2024

House prices are flat-lining throughout the country as tougher economic times prompt buyers to pull back from the market, Quotable Value says.

The property research company's latest House Price Index is out, and it shows the price of homes nationwide dropped by 0.9% over the three months to the end of June.

That left the average national house price at $916,285, which was still 2.8% up on $891,585 at the same time last year.

But the rate of decline had picked up since the last index, where prices fell by 0.2% over the three months to May.

The national average remained 13.9%, or $147,480, below the market peak of $1.06 million in late 2021.

Quotable Value (QV) operations manager James Wilson said tough economic conditions and high interest rates were making it hard for potential buyers to secure finance, and many were in hibernation until conditions improved.

At the same time, homeowners were under more pressure, although most were not in positions where they had to sell, he said.

'Sellers though are having to adjust their price expectations in what has increasingly become a buyers' market, albeit a pretty quiet one.

'An abundance of listings is also having a cooling effect on the market, reducing remaining competition, and flattening growth across much of the country.'

That had led to downward price pressure spreading across all segments of the market, he said.

'Investors, owner occupiers and even first home buyers, who are still the most active group in the market, have all taken a noticeable step back as we pass the halfway point of the year.'

Because most people did not have to sell, there had not been a big drop in prices, but they were seeing more variation emerge around the country, he said.

QV's figures showed Auckland prices declined the most, down 2.6% over the quarter, as compared to a 1.4% decrease in the last index. The region's average was left at $1.25m.

The next biggest falls were in Tauranga and Palmerston North where prices were down 1.3% to $1.02m and $637,525, while in the Wellington region they dropped 1.2% to $865,129.

In contrast, Dunedin, Rotorua and Invercargill recorded quarterly increases of 1.3%, 1.2% and 1.0% to $643,554, $670,664 and $485,551 respectively.

But in the other 10 urban areas monitored by QV, prices either remained steady, or decreased.

Of the main centres, Hamilton prices were down 0.3% to $781,975, while Christchurch prices stayed flat with 0%, leaving the average at $764,228.

In Hastings, Napier, Marlborough and Queenstown prices remained steady, inching up by from between 0.1% to 0.9%.

Wilson said prices in the South Island were slightly stronger in the South Island than in the North, although they were not booming.

Price growth in these areas had taken longer to slow, or was not slowing as much, he said.

That was because the dominant buyers tended to be first home buyers looking for more affordable options, or owner-occupiers who were relocating permanently or up-sizing.

'These are long-term sustainable buyers, and in contrast there are big pockets of the North Island with more investors or existing owners buying second or third properties.

'It is areas with those more sustainable buyers that tend to hold up better in downturns. Prices might soften, but their peaks and troughs are not as pronounced.'

The outlook for the market over the next few months was a bit frosty, Wilson said.

'There's nothing to suggest that prices will take off again in the near future, and the primary reason for that is rates, with the Reserve Bank unlikely to drop the OCR anytime soon.'

The recent reduction of the bright line test could also lead to more listings coming to market, and that would give buyers even more choice and keep downward pressure on prices.

While the current market had slowed, it also seemed to be returning to the more seasonal conditions that used to occur in the New Zealand market, he said.

'Traditionally, the market used to be very cool in the winter months, and if you talk to agents who have been through a few cycles they will tell you that.

'We haven't seen that for nearly a decade because of the boom times, but we do seem to be seeing it again now.'

Unless the Auckland market, which had slowed the most, had a pick-up in activity, prices overall were likely to remain flat or keep gently falling, he said.