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House values are continuing to fall but not quite as fast as a month ago.
Nick Goodall, research head at CoreLogic, said September’s 1.5 per cent drop in national values slowed to 1.3 per cent in October but that was no immediate cause for optimism or thinking a turnaround wason.
Average house values nationally were $954,202 in October, down from $977,158 in September. Auckland’s average house value of $1.38 million in September fell to $1.36m last month.
Goodall warned of further interest rate rises.
“Any shoots of optimism are likely to be cut short by future increases to the official cash rate starting with the next monetary policy statement from the RBNZ on November 23,” he said.
This downturn continues to compare unfavourably to the last major one after the Global Financial Crisis in 2008, he noted.
The national quarterly rate of house value falls at the end of October was 4.5 per cent. That now exceeds the worst quarter from that period, which was -4.4 per cent at the end of August 2008, he said.
The annual rate of change has now fallen into the negatives, only a year after experiencing the strongest rate of growth on record at 28.8 per cent in the year to the end of October 2021.
Stretched affordability is constraining buyers’ ability and willingness to get or extend mortgages. Landlords were also faced with tighter tenancy regulations, rising costs and reduced rental growth, Goodall said.
“This all leads to reduced demand and contributes to falling prices for our largest asset,” he said, citing the constraints on homeowners as well as landlords.
A mans hand holds NZ dollar bills against a front of a traditional villa house in Auckland, New Zealand. Buy, sale, real estate, insurance, mortgage, bank loans and housing market concept.
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The Reserve Bank could soon shift away from its current focus on containing inflation and also consider more deeply the impact of tightening monetary policy on the economy, employment and property values, he said.
“For now, the impact has been manageable and limited, but with each OCR hike comes a heightened risk of a deeper and longer recession and with it growing unemployment and financial stress,” Goodall said.
Auckland values fell 1.5 per cent in the latest month, Hamilton’s 1.6 per cent, Tauranga’s 1.8 per cent, Wellington’s 2.6 per cent, Christchurch’s 0.2 per cent and Dunedin’s values stayed static.
Within Auckland, value drops have been highest at Papakura down 5.8 per cent in the latest quarter, Rodney down 5.4 per cent, Manukau down 5.1 per cent, Auckland city down 4.7 per cent, Franklin down 4. 3 per cent and the North Shore down 4 per cent.
The monthly results were more mixed in the other main urban areas with mini-bounces in value occurring in Nelson and Gisborne after prior monthly falls. Values remain down on the quarterly measure everywhere except Queenstown, but New Plymouth has shown similar resistance with values still 10 per cent above the same time last year.
For the other main centres in the North Island, values are now lower than they were a year ago for the first time since this downturn began, Goodall said.
Barfoot & Thompson is due to release its monthly sales data for Auckland and Northland this week, then the Real Estate Institute figures will be out around the middle of this month.
Columnist Matthew Hooton wrote on October 28: “ Businesses and households are right to be terrified about what lies ahead. Over 100,000 households are going to come off fixed mortgages in the next year, and face a tripling of their monthly interest payments. At the same time, house prices are now picked to fall by more than a quarter off the peak. A family who bought a $1 million house at the peak with a $250,000 deposit will lose all their savings and have to pay three times as much interest on the $750,000 they borrowed.”
