House sales plummet to lowest ever

The latest REINZ data shows just 2,759 residential properties were sold nationally last month – down 27% when compared to the same time last year.

Even after the global financial crisis (GFC) house sales were above 3,000 in January months for several years despite a severe housing market downturn. 

The number of residential property sales across the country declined month-on-month by 38.7%, and 27.0% year-on-year.

REINZ chief executive Jen Baird says the sales slump last month was intensified by Auckland’s poor weather. Just 943 properties in the city changed hands during the month – the lowest since records began. 

Across the country Manawatu/Whanganui, Northland and Waikato and Southland had the second lowest sales month since records began. 

Falling prices

House prices are also falling, with Auckland dropping under $1 million to $940,000 last month for the first time in two years.

REINZ’s figures show nationally, the median price for residential property dropped 13.3% annually to $762,500 and declined 9.3% for New Zealand, excluding Auckland, to $679,000.

The House Price Index (HPI) showed an annual drop of 13.9% in line with sale price changes.

Over the past 15 months Wellington has been ranked as the worst for the year-on-year HPI movement, while most of country, apart from Auckland, Bay of Plenty and Manawatu/Whanganui, had their biggest year-on-year HPI drops since records began.

Listings at record levels

Nationally, there was a 16% drop of new listings from 7,912 in January last year to 6,646 new listings in January this year and an increase of 28.9% compared to December last year.

However, at the end of January, 27,732 properties were available for sale across New Zealand — a whopping annual increase in inventory of 39.4%. For New Zealand, excluding Auckland, there was a staggering annual increase of 55.9% (17,781 properties).

This indicates there are far more properties for sale than buyers, which is not going to improve for a while. 

It flows into the median number of days to sell a property, which last month was 53 — 16 days longer than in January last year.

Optimism

Baird says while January is usually quiet - in seasonally adjusted terms last month’s numbers show a January that performed better than expected.

“The sales counts are down for January 2023 compared to December 2022 for Auckland by 31.5%. When the seasonality is removed, the sales count numbers show Auckland performed 19.4% better than expected when compared to December last year.”

She says reports of more activity in the market are growing “Agents in many areas are reporting more attendance at open homes, more interest online and even more multi-offer situations.

She says it seems there are more buyers active in the market. “February and March data will tell us if they choose to act.”

Baird says the latest data does indicate a slowing of the decline. “The coming months will be telling as the country braces for more activity both in the weather and the property market.

“Agents around the country say owner occupiers remain active, and that there has been increased interest in out-of- town buyers looking in different regions.

“Sellers are tending to be more realistic and will usually meet the market through negotiation — however, many remain cautious with properties taking longer to sell, and investors sparse.”

Any signs house price drops are stabilising gone

While for the past two months REINZ has claimed house prices drops are stabilising, QV says those claims have been quashed by a 1.1% fall in January.

QV says the drop nationally suggests a steeper decline and put the annual drop in prices at 12.1%.

QV chief operating officer David Nagel says is looks as though the bottom of the market has not been hit yet.

“As a result, it seems many prospective buyers are being cautious right now, waiting to see exactly how far prices will fall.

“Others are finding it too difficult to obtain finance or are unwilling to make such a commitment given the high level of economic uncertainty.”

He says no one is arguing whether price falls are happening, just the magnitude of those falls.

Palmerston North and Hastings had the biggest falls of 3.3% and 3% respectively for the three months to the end of January.

The Wellington region was also hard hit with an average house price fall of 2.8% over the three months and a decline of 20.4% annually.

In the Auckland region house prices were on average 14.3% lower than at the same time last year.

Price falls also hit Christchurch and were down 1.3% to an average price of $849,097 for the three months to the end of January.

Queenstown had it first quarterly house price drop, with values falling on average 0.7%.

Falls to keep coming

Most economists expect property prices to keep falling and reach a trough of 20% plus if the Reserve Bank hikes the OCR again this month.

The Reserve Bank has also admitted it will try to engineer a recession this year. This could lead to the unemployment rate lifting and mortgagee sales if homeowners cannot meet their mortgage payments.

However, investors, who usually take a quarter or more of the buying market share are sitting on the sidelines waiting for October’s general election and whether the government will change. National has promised to reinstate mortgage interest payments as tax deductions and roll back the Brightline test.

Weather doesn’t help

Nagel says the recent flooding and Cyclone Gabrielle have done less than nothing to halt price drops.

He says house values in flood-stricken areas of Northland, Auckland and Bay of Plenty were likely to recover fairly quickly, as was seen in Nelson following another extreme weather event last year.

“But the record amount of rainfall has been yet another obstacle for potential buyers and sellers to deal with at a time when house sales are already at an historic low.

“It’s little wonder it’s been a slow start to the year for the residential property market as people also grapple with an increasing cost of living, rising interest rates and inflation.”