Still falling, but about to stop, CoreLogic is assuring us, as national house values continued to edge lower in August.
According to the CoreLogic House Price Index (HPI) national values nudged 0.2% lower in August, with the three-month change "also easing" to a 1.8% fall.
Nationally, the average property is now worth $905,466, which is 13.2% below the peak (or -$137,795), and down 8.7% in the past 12 months. But this is still 24.3% ($177,190) higher than March 2020’s ‘pre-Covid’ figure.
CoreLogic NZ chief property economist, Kelvin Davidson said a number of key sub-markets had recorded value increases in August and "it’s only a matter of time until the national average flattens out or even starts to rise too".
"Although values have continued to edge lower nationally, the floor is likely to be near, with many of the key fundamental drivers now turning around," he said.
Davidson said 2023 "always had the potential to be a year of two halves – subdued for a start, but signs of an upturn later – and this is coming to fruition".
“However, the next phase for the market still looks likely to be slow and patchy, rather than the rampant upturn we saw over 2020-21.
"After all, the volume of sales is rising from a very low base of less than 60,000 annually, and it may be quite some time until purchasing activity returns to ‘normality’, which is around 90,000 to 95,000 sales per annum. Affordability is still challenging, mortgage rates are set to be ‘higher for longer’, and debt to income ratio caps for mortgage lending remain on the cards for 2024 – all factors which could help to contain any major market exuberance."
In such an environment, Davidson said, buyers won’t feel excessive pressure to secure a deal before somebody else does, "in turn keeping some kind of lid on price growth".
"Granted, ‘animal spirits’ can drive faster growth in values than the underlying drivers would suggest is likely, but psychology will likely have a lesser role to play when mortgage rates are 7% and those real cash outgoings to service debt each week are high."
Mortgage rates are likely to now be close to their peak, Davidson said, although further small changes can’t be ruled out as global markets, and hence wholesale financing costs, "remain a little jittery".
"On top of that, migration has significantly boosted property demand, and labour markets remain robust. We’re also now starting to see the impact of the loosening in the loan to value ratio rules from June 1 flow through to more low-deposit lending for both owner-occupiers and investors with a 35% to 40% deposit, who were previously locked out.”
Davidson said a possible National Party win in the October 14 election could have an impact.
“A shorter Brightline Test may drive increased investment purchases, but also some sales by existing investors, given no/reduced liability for capital gains tax. And while the phased reinstatement of mortgage interest deductibility could boost sentiment, the hard sums might not be altered too much – many purchases would still make big cashflow losses for a start, because rental yields would still be low and mortgage rates high. Of course, existing investors would pay less tax.
“The softened foreign buyer rules could also boost demand and prices, although probably more so in local markets than across NZ as a whole. In Queenstown, for example, about 10% of properties are valued at $2 million plus, and we know it’s already more popular with foreign buyers, who could potentially exacerbate the shortages of stock at ‘affordable’ prices that already exist."
A more detailed regional breakdown of the latest figures is available here.
84 Comments
Business confidence at a 2 year high, rents up, housing costs up, high immigration bringing more demand for goods and services, wage increases, tax cuts, sounds like a good receipe for continued high inflation. Maybe the current OCR isn't as restrictive as the RBNZ thinks.
Core logic lags behind the current data - REINZ HPI already shows a plateau. Hard to call the future, this may be transient as the combination of a likely change in government coupled with the natural Spring bounce give way to the suffocating effects of a sustained OCR, China fallout and sticky inflation.
I don't see the equilibrium moving enough to cause a significant lift or drop from here - just stagnation which in the face of current inflation means a drop in real term values.
Agreed. As inflation fueled construction costs and more normal interest rates apply, I just cannot see this being the floor. It is more unafordable that ever. End of the day there are many leveraged interests all pushing for endless bank profit. How many billions a quarter are to many...?
Vote to take the TOP off of speculation driven record bank profits.
There's a lot of levers to push house prices down, but normalizing interest rates. Didn't we have an announcement from RBNZ that interest rates will stay at current rates for foreseeable future. This to me says everything. Even if rates were to come down early next year, can't see them coming down much. Also DTI will most likely kick in next year. Other then Luxon doing a bit of insider trading to grow his property portfolio can't see much help for prices. We will see.
Starting from November, overseas investors will be coming in to buy them all at $2m +. The whole market has just been revalued upwards massively. Homes for locals will likely settle in the $1.8-1.9 range, while anything 3+ bedrooms and within 500km of Auckland will be $2.2m easily.
Capital gains may be harder to spend with the NZD being around 0.25 USD, so will better to just roll the profits back into housing.
Average at the moment around $900k, in that scenario the real price of a $2m home has halved (nzd halved). So looking at a 11.11% real increase in house prices but absolutely trashing the economy to get there. The National way, the only way 😎
Edit: no, NZD to 25c is more than half. So would be about 7% real decrease to $2m
Thats how they’ll get the FBB lifted for all average homes. Trash the dollar.
Those who don't want to rent while they are here for a few years. Not many high end rental properties available for workers like surgeons, CEOs and film producers. They'll just treat it as the equivalent to rent payments. Plus the house will have appreciated over that time so works out cheaper than renting.
So after two years, they can become a resident and buy without the tax. So we're talking about a 2 year timeframe. $3000 pw. There are 8 properties for rent over $3k per week. There are much better ways to invest $2m than to instantly lose 15% and then rely on 7.5% appreciation yoy.
I don't think you realise how rich some people are in this world. That $2.2M is like $22K to some people, they can buy a house here for the fun of it and not even live in it. Same thing happened years ago in a new Long Bay development, it was a ghost town with overflowing mail falling out of mailboxes and unmown lawns.
I don't know what RBNZ's full charter is, but in other countries central bank's main goal is banking stability
Yes, they have these 3 main goals here: inflation target 1-3%, sustainable (un)employment and sustainable house prices. But I presume banking stability is also a goal here as well? Why did they introduce LVRs back when housing wasn't one of their goals?
DTIs are part of stabilising the banking system as much as they are part of sustainable housing
I'm not sure about the whole thing above - just makes a lot of sense to me - so I'd appreciate a confirmation from someone who bothered to Google it
Pa1nter that is retail banks which most FHB and people moving on from one house to next. Most property investors and this is investors with more than 3 houses as retail banks don't deal with them use 2nd tier banks who are not regulated like retail banks and also most investors can set up a company to borrow the money and are even less regulated. And 2nd tier banks floating rate is very competitive with retail banks. So if DTI and LVRs get stricter all it is doing is affecting those FHB and people trying to up grade homes. So if govt changes in Oct and IF a big if (as I see Nat/Act backtracking) the new govt changes the tax deduction law back in favor of landlords. You will obviously see more investors in the mix. The 2 mill overseas buyer law is neither here or there as showen when labour bought in the overseas buyer ban it did nothing to the prices of housing so with the cost of housing going up making existing housing more appealing and less permits issued. The prices for houses now definitely ain't going to plummet even if they just roll along at the price they are now still not dropping like some on here believe. Thou NZRB if they raise OCR which I think will with change of govt it shows that is the one lever that affects house price
$350b first tier, $5.4b second tier.
On my phone so can’t pull it up but Audaxes linked to the RBNZ page for mortgage books on yesterdays 4pm daily digest.
Edit: that’s current accounts not amount borrowed per timeframe.
Edit ii: Here - recommend downloading the XLSX and having a wee looksee at bank and non bank balance sheets over the last few years. The big drop in second tier mortgage balance over the last year is one to keep an eye on. This may be ok for now, but I personally wouldn't be so eager to put my money there given what happened last time the balance sheet dropped off like this (GFC) and a number of financial institutions dissolved. What happens then? A big bank buys the loans and immediately calls them in?
https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/registe…
Basically a rounding error - the registered banks do 98.5% of mortgage lending.
Edit: you can download the series too. When LVRs were introduced in 2013, non-banks made up ~1% of the market, now 1.5% having oscillated between a 0.7% low in 2016 and now falling from the 1.8% high in 2022.
Malamah so loans via 2nd tier has dropped off this last yr who has not been in the market the last yr one guess who predominantly uses 2nd tier those same people who ain't in the market. Going back to GFC times most of the 2nd teirs then were owned by the main retail banks example Origin was owned by ANZ so when the shit hit the fan they closed down origin and brought all those mortgages back under the stricter ANZ critea. Most 2nd tier lenders now are independent of retail banks and if like normal we follow Aus in cycles have had an uptick in growth as more people deal with them. They are there for either self employed or investors and I certainly wouldn't recommend them to a first home buyer and or someone in a job who is moving up house. But if you are wanting to either develope a property and or borrow out side the box then they are the go too
Even in these quiet times, investors are borrowing about a billion dollars every month. The total stock of non-bank mortgages at about 5 billion suggests most investors are sticking with the main banks.
I don't doubt that much of that 5 billion is from investors, but seems pretty clear this is a small portion of total investor borrowing.
https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/new-res…
lvrs were introduced to help investors beat fhb. I still remember Simon Bridges lying through his teeth at the announcement, saying 'they will benefit fhb', meanwhile we foresaw what happened next - fhbs kicked out of the market for the next 6 months while speculators snapped up all the entry-level houses with no competition as the banks refused to lend to fhb. (for us, we went from house shopping to, 'oh well, this sucks' as our then-deposit was rendered too low at the stroke of a [government] pen).
I'm not predicting a big jump in listings this spring. Most people wanting to sell would not hold off listing for the supposedly better season. Seasonal variation in listings is more pronounced when house prices are rising. Not when they are falling. The seasonally adjusted jump in winter listings supports this theory. We'll see I suppose.
We're considering selling our Wellington property in late 2025/early 2026, and we're doing our forward financial planning based on what all the most popular estimation sites are saying it's worth now. I don't see a lot of growth ahead, and possibly still a downward slide for a while longer.
Anything we get over that value is a bonus in our minds.
RBNZ needs to kill this sentiment. Maybe Orr should just come out and threaten the likelihood of a large OCR increase after the election directly referencing National and Labours crazy plans + the real estate industry constant talking up of large price increases coming.
I know they normally stay quiet in the lead up to an election, but it would save us all a lot of pain now before it actually happens.
More spruking of the property ponzie economy? Things are never going to change. Young people will never have any hope of ever affording their own home. Their best hope of any sort of reasonable future for them or their children is to leave New Zealand permanently.
There's definitely a hope. Just rather than in days gone by and you could get some generic job that'd cover your mortgage and the wife would stay at home, you now have to carefully craft your career and finances.
The whole world is in the same boat, so the kids won't be escaping anywhere. If anything, NZ will become one of the least bad places to be.
For the average young person, there is definitely no hope. House prices north of $1 million. A low wage economy with a benefit poverty trap where it is next to impossible to get beyond living hand to mouth, let alone save anything for house deposit.
Your children will be educated in a system that is totally failing and if you or they get sick there will be a disturbingly high chance you may die or suffer permanent disability while waiting for care.
That makes no sense. As a member of NZ society, I want to walk around NZ and enjoy our beautiful country, the beaches, the towns. NZ is made up with a variety of people and in general, rich or poor, most people are cool and down to earth. The picture your painting, is only the above average will succeed, that is not where most NZers sit. We need a society that benefits all, it won't be perfect for some, but at least it will be good enough where we can still walk around and enjoy our country in relative safety. Even above average will want NZ as a whole to have crime free and safe environment, which can only be attained by not having to many down and out people with no options.
As a human, I've walked around a number of places.
What Kiwis take for some sort of right, is actually extreme privilege. Born from a combo of extreme sacrifice by founders, and the residual wealth and technology effect of being Anglo Saxons. That's not a perpetual energy machine, especially in a world with less and less borders, and a much closer gap in capabilities of countries and individuals.
Whether its your job, finances, romantic relationship, friendships or even yourself, there's a greater than average level of conscious effort required to yield much worthwhile.
Your comments about safety and down and out people has a financial component, but the root causes extend far greater than moving around house prices and tax brackets. Again, it'll take a greater than average effort to make meaningful improvement there.
A lot of speculation about, but the most salient fact about the housing market is that the cost of debt is nearly three times what it was just 18 months ago. There is a real possibility that it will go higher, perhaps much higher, over the next year. The chief determining factors, of course, lie outside of NZ.
Combine this with the fact that house prices are still wildly out of line with average incomes, and it is very hard to see any appreciable rise in prices over the next year. In my opinion, there is a significant chance that we will see another substantial fall; nothing goes up or down in a straight line, after all.
Even assuming National wins next month and implements its stated plans, I don't see this outweighing these fundamentals.
Well, you seem determined to downplay the relevance of something that virtually everyone thinks is linked to house prices, in NZ and globally: how much does it cost to get a mortgage? The precipitous rise in interest rates over the last year (immediately following the period that they were at record lows) is what best explains the current fall in the housing market. Or do you disagree?
Of course, you may think that the odds are good that rates will fall in the near to medium term. If I knew otherwise, I would be rich. But the evidence, it seems to me, points in the other direction.
People have to lend money to afford houses.
But not every low interest rate market experiences house price inflation the same. So you need other factors, including the costs to produce new supply, demand for that supply, etc.
In regards to rates, who knows. But it does appear like we are in for global economic downtimes in the short-medium term. Highly likely quantitative easing will resume, and eventually with it, a desire to over extend in housing.
This is not me advocating this system, but it pays to also understand what we are dealing with. The social headwinds may change things, when hard to say. It'll have to get worse than now before that.
Joe Smith is onto it. If Nationals two year bright-line test comes back there will be a load of new listings appear on the market within months if not weeks. For me this has the potential to keep prices lower for longer. Add in high interest rates, a slow-motion Chinese property collapse along with huge debt loads across the world generally & I'm not sure our house prices are headed too much higher for a little while longer yet.
We are nowhere near the bottom, average income is around 70k so even at 5 x DTI so 350k would be top banks should lend one person a couple maybe 700k so average place in Auckland 1.25 million a big difference.maybe top 10% of earners will be rushing to buy 3 bedroom box in some run down area of Auckland.
For a FHB, it's just a $350k mortgage + plus their deposit.
But for an existing home owner sitting on a $1m property bought ages ago ... It's just another $350k.
This is how the banks make money. Not from FHB. But from existing homeowners re-using their un-taxed Capital Gains to buy something worth another $350k. The banks love house price inflation as the clip the ticket all the way to destruction.
In case you're wondering - I support a capital gains tax on every residential property - owner occupied or not. It is non-distorting way of introducing a CGT. Obviously, other tax, especially PAYE which needs to be dropped to reward actual production, would be dropped at the same time a comprehensive CGT that includes owner occupied capital gains was introduced. This gives everyone real choice where they spend, or save, their money. Buying a house to live in, btw, is ONLY 'saving' because of our daft system that ensures capital gains go untaxed. (Of interest here is that 'Stamp Duty' is a form of capital gains tax disguised as a transaction tax. It too is distortionary, and environmentally destructive, as it reduces the 'free flow of labor'.)
And yet most economists say the "full effects" of the now high OCR have not yet filtered through to the wider economy?
And they say the second half of the year will be much grimmer than the first half?
Methinks we'll not see any significant house price rises, i.e. greater than 2%, for quite some time to come.
Maybe Spring 2024?
And even then it'll be subdued for the MDRS & NPS-UD reasons I've already stated. (And, btw, the cost to build is now falling too if you negotiate hard ... and can provide assurances that the suppliers will be paid.)
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