One way traffic for REINZ housing report

The run of play in the housing market continues to be largely in one direction, the latest data from REINZ reveal.

The REINZ House Price Index (HPI), fell another 1.4% in August to be 5.9% down on the same month last year.

The median house price across the country of $800,000 was down by the same rate as the HPI in August. The rapid rise in mortgage rates this year continue to weigh on the market as debt servicing becomes increasingly expensive.

The median residential property price for New Zealand, excluding Auckland, remained unchanged compared to last year at $700,000. There was a month-on-month drop of 2.8% from $720,000.

Four regions had an annual decline in the median price last month. Auckland’s median price dropped 8.3% compared to August last year, down from $1,200,000 to $1,100,000. Six of Auckland’s seven territorial authorities had negative annual growth - down 13.4%, Waitakere had the greatest decline followed by Auckland City where the median price was down 12.3%.

In Wellington, the median price was down 9.3% annually, from $860,000 to $780,000 last month. Carterton had a median price drop of 25.5%, while Wellington City was down 21.8%. The Manawatu/Whanganui region was down 6.6% from $610,000 to $570,000, and Northland had a drop of 1.2% from $650,000 to $642,000.

All other regions had annual increases in median price. West Coast recorded the greatest percentage increase in the median price — up 25.0% from $280,000 to $350,000. The median price in Marlborough increased 14.5% from $585,000 to $670,000, and Gisborne had a median price increase 13.2% from $500,000 to $566,000.

REINZ chief executive Jen Baird says in the past six months, the median price across New Zealand has dropped by 9.6%, while Wellington has had a decline of 21.6% — from $995,000 in February 2022 to $780,000 this month. These are the greatest six-month drops since REINZ records began in 1992.

“Despite the median property price easing across the country and supply increasing, sales activity remains subdued. These positive aspects for buyers are offset by higher mortgage rates as rising interest rates and concern around inflation continue to put the brakes on for many potential buyers,” says Baird.

“That said, some real estate agents are reporting an increase in open home attendance. And while owner occupiers remain a dominant force in the market, first home buyers are beginning to re-emerge. Although affordability remains a challenge, the relaxing of the Credit Contracts and Consumer Finance Act (CCCFA) and opportunity to negotiate are attracting savvy first home buyers, she says.

No good news

Meanwhile, KiwiBank says it’s hard to find good news from within the latest housing market data. But it did try.

For instance, there are early signs the trough in house prices might be on the horizon, says senior economist Jeremy Couchman.

“The 4,891 sales recorded by REINZ in August were almost 8% up compared to July (seasonally adjusted). And compared to last August, sales were18% lower. Up from the 35% year-on-year drop recorded in July.”

He says importantly, annual comparisons of sales from August to September will be distorted by last year’s delta lockdowns – mostly centred on Auckland. “Nevertheless, sales are a forward indicator of house price movements, loosely leading house price growth by about six months.

“We are forecasting house prices to be 13% lower by year end. A dramatic fall for sure. But a 13% trough would only take the HPI back to levels seen at the start of 2021. From early next year we see a gradual recovery in prices. Gradual because significant new housing supply is far outstripping new housing demand,” says Couchman.

“Delta distortions aside, buyers seem to have the upper hand. The level of listed supply remains high by recent standards. And elevated supply is likely to dent any market gusto during the coming spring season.”

Couchman says in addition, the median number of days to sell (DTS) a property rose further in August to 49 days. That is the highest DTS since May 2020 – resulting from the first nationwide covid lockdown – and a full 10 days above the long-run average.

“We will want to see a fall in days to sell before we are confident that house price growth is turning around.”

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