HOUSE VALUES STILL HAVE FURTHER TO DROP

The housing market is still in the doldrums, with predictions values will fall further over the year - spurred by a floundering economy, high interest rates and banks’ reluctance to lend.

The latest Real Estate Institute data show the median house price across the country dropped 12.9% annually to $775,000 in March.

At the end of March, the total number of properties for sale was 29,284, up 3,625 properties (+14.1%) year-on-year.

The total number of properties sold was 5,877, up from 4,113 in February, and down 15.0% year-on-year.

The House Price Index showed an annual decline of 13.1%.

Home values have made the biggest first-quarter fall in more than 15 years, according to the latest QV data. Since the beginning of last year, average house values have dropped by more than $250,000 in Auckland and Wellington.

In many areas across the North Island, value declines are in six figures - signalling more is to come.

The latest QV House Price Index for March shows property values have dropped by an average of 3.9% since the start of the year – weakening further from the 2.7% three-monthly decline in February, and the 1.7% three-monthly decrease in January.

The average home value is now $907,737, which is 13.3% less than the same time last year.

It is a significantly bigger first-quarter decline than at the same time last year, when property values dropped by an average of 0.6% throughout the first three months of 2022.

The latest QV figures show the rolling three-monthly rate of reduction increased last month in all bar two of the country’s 16 largest urban areas, with the most significant quarterly home-value reductions occurring on average in Whangarei, down -6.6%, and Rotorua, down -5.7%.

Of the largest cities, Auckland (-5.2%), Hamilton (-5.2%), and Wellington (-4.8%) led the decline.

Christchurch (-1.2%) and Hastings (-2%) were the two exceptions – the former experiencing the smallest drop of the main centres.

Biggest property-sales slump in nearly 40 years

Interest-rate hikes and tighter lending rules have triggered the biggest property-sales collapse since 1981.

Figures from CoreLogic NZ show 60,859 properties were sold in the year to February 2023 - the lowest 12-month total since October 1983.

For February alone, about 4,100 deals were done. That’s the lowest for that month since at least 1981.

CoreLogic NZ Chief Property Economist Kelvin Davidson says the figures are striking, showing just how quiet the market really is.

“Few vendors are in a hurry to sell, given that unemployment remains low.”

Other key highlights of the report include house sales in the 12 months to February 2023 are down a third (-32.7%) on last year; 16% more listings on the market than this time last year; property values were down 1% in February, -1.5% in the past three months, and -8.9% over the year; Wellington is the weakest of the main centres, with values down 19.7% from the peak, while Christchurch is only 4.7% down since then; cash buys by multiple-property owners (including investors) make up 15% of purchases, a record share for this type of buyer.

The latest Investor Survey by economist Tony Alexander and property management company Crockers shows One-year fixed preferred for those with debt.

Survey results show banks are seen as more willing to advance funds over the past two months; a relatively high 82% of investors intend raising their rents over the coming 12 months, up from just 70% in December; investors have become more concerned recently about rising insurance costs; concerns about reduced net migration are easing; and landlords report that good tenants are increasingly easy to find.

Alexander and Crockers’ survey shows that for the 21% of investors thinking about buying a property in the coming year, 56% will still buy an existing property, 28% will buy a new property, and 16% will undertake their own property development.

Residential builders on cusp of a big downturn

A major slowdown in the construction industry is fast approaching. Building consents have plunged 29% in the year to February, Stats NZ figures show.

There were 2,972 new homes consented in February, the fifth month in a row the number of new homes consented has been below the same month of the previous year.

NZ Stats construction and property statistics manager Michael Heslop says the drop in the number of homes consented last month is big when compared with February last year.

“[February 2022] had the highest number of homes consented for any February month on record,” he says.

On a yearly basis, the number of new consents reached 48,257, down 3.3% compared to the previous 12 months. It is the first time on an annual basis they have dropped since 2012.

The number of new homes consented in February fell 9% compared with January.

There were 27,872 multi-unit homes (townhouses, apartments, retirement village units and flats) consented in the year ended last month, up 15% compared with the previous year.

The number of stand-alone houses fell 20% to 20,385 over the same period.

Rent drops bad news

Rents in some areas across the country appear to be dropping, the latest bond data show.

This is bad news - particularly for the Auckland CBD market, which is awash with apartment investors who are just starting to get on their feet again after international students fled when the pandemic hit.

Bond data from Tenancy Services shows median rent for a one-bedroom Auckland CBD apartment dropped by $30 a week from $430 in January to $400 in February.

For a two-bedroom apartment, the median rent also dropped $30 a week from $560 to $530.

The national median rent in February was $560 a week, down from $575 a week in January, but up by $10 week from last February. ✚