It’s all about green shoots, finding a base, forecasting how much of an upswing could be in store and how the Reserve Bank might react: that’s the take-out from expert analysis from today’s Real Estate Institute data.
“The New Zealand housing market has found a base, with both sales and prices pushing higher for a third month in May.”
That was the conclusion of one of NZ’s top economists in studying the figures.
Satish Ranchhod, Westpac senior economist, said that while the level of sales remains low, volumes had risen in each of the past three months.
Taking a bigger picture, he told the Herald how we’d already hit the bottom of the market four months ago, in February this year.
“Nationwide, we saw average house prices drop 17 per cent between November 2021 and February 2023. Since February, nationwide house prices have risen by an average of 0.4 per cent, so prices are roughly where they were at the start of 2021,” he said.
In analysis he released today on the May REINZ data, Ranchhod said sales volume increases had been spread across regions, with sharper turns in Auckland and Wellington.
The drop was less startling. The annual house price index percentage change was down 11.2 per cent whereas previously it had been down 11.9 per cent.
The monthly sales volumes rose 2.5 per cent as well.
Looking ahead, he expects to see modest house price rises during the next few months.
The sharp turnaround in net migration is adding to the demand for housing. In addition, the easing in some longer-term mortgage rates in recent months will also help to support demand. But while the housing market has found a base, interest rates are set to remain at contractionary levels for some time yet. That will hopefully limit any material uplift in the housing market, at least in the near term, Ranchhod said today.
The latest data had signalled that the sharp downturn in our housing market has come to a halt. Sales had been rising for the past three months. Similarly, house prices have now stabilised after they dropped sharply over the past couple of years, he said.
Sharon Zollner, chief economist at ANZ, said the May data showed another month of lifting house sales with prices on the cusp of lifting.
Sales had jumped back up to roughly year-ago levels, confirming ANZ’s assessment that the market was strengthening.
“We are forecasting house prices to lift a bit over 3 per cent in the second half of the year boosted by strong net migration, an RBNZ OCR pause and the loan-to-value limit tweak,” the analysis said.
She noted sales volumes had lifted 2.1 per cent from April to May.
And how might the Reserve Bank see the green shoots emerging? Its tolerance will depend heavily on the state of the labour market, ANZ said.
Mark Smith, a senior ASB economist, said house prices essentially flat-lined in May.
“This marks the third consecutive month in which overall prices have barely budged, with prices down 16.3 per cent since their November 2021 peak. Seasonality may have played a role in the apparent resilience of late, with prices down 0.7 per cent in non-seasonally adjusted terms in May to lie 2.2 per cent below February levels,” Smith noted.
He also thinks housing could be in recovery mode.
Broader housing market drivers are also looking more supportive for prices, with solid net migration, supply indicators stabilising and mortgage rates look like they are close to peaking, Smith said.
Nationwide house prices look set to edge higher given key support factors, but we don’t expect prices to gallop away given stretched affordability, he said.
What REINZ announced
REINZ today announced house prices rose in three regional areas but elsewhere activity remains depressed, especially Auckland where sub-$1 million prices prevailed for the third month in a row.
Waitomo, Nelson and a West Coast area were exceptions.
Chief executive Jen Baird said there were “glimpses of positivity” in the May data.
“Early signs of returning confidence as sales volumes rise in the regions” was the headline on her statement.
Waitomo prices rose 53 per cent annually to a $655,000 median, prices in the Grey District centred around Greymouth were up 18.7 per cent with a $400,000 median, and Nelson prices rose 7 per cent annually to $770,000.
Elsewhere, prices dropped.
Northland median prices dropped 2 per cent annually to $715,000, the Bay of Plenty is down 12.2 per cent to $790,000, Waikato is down 7.5 per cent to $740,000, Taranaki is down 16 per cent to $534,000, Gisborne down 9.8 per cent to $600,000 and Hawke’s Bay down 10 per cent to $660,000.
Manawatū-Whanganui fell 12.4 per cent to $528,000 and Wellington is down 11.7 per cent to $795,000.
Anne Gibson has been the Herald’s property editor for 23 years, having won many awards, written books, founded the National Business Review’s property section in 1985 and covered property extensively here and overseas. She joined the Herald in 2000.