'Significant value reductions' seen as house values continue to fall

House for sale signs. Photo / File

House values have continued to fall with an oversupply of stock heading into spring.

The Quotable Value House Price Index for August indicates national prices fell 5.5 per cent in the three months ended August, building on a 4.9 per cent drop in the July quarter.

The national average house price was $973,848, which was just 1.1 per cent up on the year earlier.

Wellington was among the hardest hit regions, with a 14.7 per cent drop in values since January, while Auckland fell 10.2 percent over the same period.

QV general manager David Nagel said the downturn was gathering pace as tight credit and rising interest rates meant an oversupply of properties.

"We're starting to see some pretty significant value reductions now, especially in the main urban areas where value growth was previously so strong," he said.

"Market gains from August 2021 have largely been eroded from the falls in the first seven months of 2022."

He said the regions were not immune to the continued slump in prices.

Manawatu and Hawke's Bay had dropped by 9.2 per cent since January.

"There are mixed views on the extent of further interest rate rises, as well as how these will impact house prices over the next 12 months," Nagel said.

"Some economists are suggesting we're close to the peak of mortgage interest rates, while other commentators are predicting house prices may fall a further 25 per cent over the next 12 months."

Queenstown was an outlier among the main centres. The resort town's average value increased by 18.6 per cent in the 12 months to the end of August 2022, including 4.3 per cent this year, and 1.5 per cent this quarter.