Residential property value declines doubled between July and August, illustrating the acceleration of the housing market downturn, new research out today shows.
The CoreLogic House Price Index said house values fell 0.9 per cent in July but 1.8 per cent in August to hit a new average of $991,647 last month.
That was down from $1.019m in June and $1.01m in July.
Nick Goodall, CoreLogic research head, said restricted and more expensive credit continued to affect increasingly weary buyers.
The property market downturn was firmly entrenched and evident across the entire country, he said.
The latest Centrix Credit Indicator for August, also out today, showed rising demand for credit and arrears, pointing to people being under pressure to meet repayment obligations.
Mortgage applications were down 25 per cent annually, suggesting people were putting real estate plans on hold in lieu of balancing their finances.
For borrowers, new residential mortgage lending was down 40 per cent year-on-year in July, Centrix said.
"Despite rising arrears, Kiwis appear to be prioritising mortgage repayments with the proportion of home loans with missed payments remaining steady at 0.96 per cent in July 2022," Centrix said.
While there were more than 14,000 mortgage accounts past due, there were no major signs of mortgage stress emerging, despite recent rate hikes and higher costs of living.
However, arrears on vehicle loans rose again for the 4th consecutive month to 4.5 per cent, the highest reported level since early last year, Centrix said today.
CoreLogic's Goodall said the three-month fall in house values of 3.5 per cent was drifting closer to the depths of the Global Financial Crisis when the rate of change bottomed out at -4.4 per cent at the end of August 2008.
"Consumer sentiment can be a key influence on the market and with the evidence of market downturn clear in every corner of the country, the already-smaller pool of would-be buyers, due to tighter, more expensive credit, are happy to bide their time in the falling market," Goodall said today.
Auckland values fell 2 per cent in August and 4.6 per cent in the latest quarter to $1.4m.
Wellington values were down 2.6 per cent monthly and 7.6 per cent quarterly to $1m.
Tauranga values fell 1.2 per cent in August but 3.3 per cent in the quarter, to average $$1.13m. Christchurch values fell 1.3 per cent and 0.3 per cent to$761,000 and Hamilton values fell 1.4 per cent and 0.3 per cent to average $863,000.
The downturn had some time to run but there was still cause for optimism, Goodall said.
"Consumer sentiment has shown signs of bottoming out, probably helped by recent falls in short-term interest rates and whispers of a market trough approaching for some markets," he said.
The borrowing environment remained tough though and along with stretched affordability from increasing interest rates, a firm bounce back in values was not expected.
"Further increases to the official cash rate are anticipated, but the shifts aren't having the same impact on mortgage rates as previously, due to the changes already being 'priced in', and the banks competing hard for the reduced pool of lending. As expectations of mortgage rates nearing their expected peak become more common, housing affordability is likely to improve, which could add to an increase in property demand," Goodall said.
If this is the case, and sentiment follows, buyers anticipating the trough may look to buy before the turning point, thus contributing to the turning point itself, he said.
Property value growth may not immediately recover to any great degree but would still spell the end of a unique downturn which had been relatively orderly so far.
Mortgagee sales remained low, although there was a lift in Q2 to 21, up from six in Q1.
Mortgagee sales were still well below the peak of 777 in Q2 2008.
A strong labour market with low unemployment helped ensure home owners kept up with their mortgage repayments– credit arrears remain low, Goodall said, citing Centrix and the Reserve Bank.
Other topical market factors were construction industry vulnerability and recent strength in building consent figures eating into the prior deficit of homes required for our population, he said.
It was a notoriously difficult statistic to calculate because it required many assumptions including the starting point, how household sizes changed and the location, size and type of housing being built.
But it still appeared as if a housing oversupply was some way off, Goodall concluded.
Barfoot & Thompson will release August sales data in the next few days and Real Estate Institute information on the state of the market for the month is due out around mid-September.