A difficult winter looms for the housing market as average values start declining

Property / news

High interest rates, a difficult economy and a surplus of listings spell trouble for the housing market over winter, says QV

13th May 24, 3:58pm by Greg Ninness

Quotable Value (QV) says it's shaping up to be another difficult winter for the housing market, with interest rates, inflation and rising unemployment continuing to bite.

The latest QV House Price Index shows the national average value of New Zealand homes increased by just 0.1% over the three months to the end of April. In Auckland, the country's largest housing market, the average value was down 0.7% over the same period.

April was the third consecutive month average house values in Auckland declined.

Other urban centres to post declines in average values over the three months ended April were Napier -0.2%, Hastings -0.7%, and Palmerston North -0.1%. Values were flat in Waikato and increased by just 0.2% in both Tauranga and Christchurch. (See the chart below for the full district breakdown).

QV's national average home value is now 2.7% higher than it was at this time last year, but is still down by 12.9% (-$136,993) compared its peak in late 2021.

"What little momentum the housing market still had going into autumn appears to have all but evaporated now," QV Operations Manager James Wilson said.

"Home value growth has largely stalled across much of the country, reflecting difficult economic conditions that aren't getting any easier and aren't likely to anytime soon," he said.

"The economy is doing it tough right now.

"High interest rates continue to bite, inflation remains stubbornly high and the unemployment rate is rising. Business confidence is low and cost of living pressures remain a significant challenge for many households."

"Amidst all this, a surplus of real estate listings is helping to maintain downward pressure on prices," Wilson said.

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47 Comments

by HughJorgan | 14th May 24, 7:16am 1715627805

This is healthy. It’s what the country needs. And no, I’m not joking. Downside risk needs to be a factor in any investment decision making.

by Averageman | 14th May 24, 7:20am 1715628056

Agreed. It's been there for some time but masked by ever lower cost of debt to keep the scam going. Just like removing steroids from a body builder you get deflation.

by Harvey W | 14th May 24, 7:54am 1715630049

Perhaps it might be down by 5% by the end of the year...

by IT GUY | 14th May 24, 7:57am 1715630269

Stiff upper lip Harvey

by Houses Overpriced | 14th May 24, 8:17am 1715631435

Assume you're not referring to house prices? If you are, time to wake up

by Yvil | 14th May 24, 12:32pm 1715646756

Just yesterday you posted that you expected a price rise by end of this year HM. I can repost your comment if you like.

by Rumpole | 14th May 24, 10:08am 1715638125

Did you miss the zero off after the five? Timing is difficult with so many chaotic issues but if the 70-90% decline in US multi level buildings is a leading indicator the perfect storm is still heading our way.

by Yvil | 14th May 24, 3:10pm 1715656257

Did you miss a zero after the 70 and 90? The market is down 700-900% in the US 😅

by Houses Overpriced | 14th May 24, 8:15am 1715631330

Prices will need to come down quite a bit before they can be classified as healthy..

Based on current conditions, chances of it happening is quite probable

by Rumpole | 14th May 24, 10:10am 1715638247

You are correct I calculate affordability based on RBNZ wish that LVR is 6 times income so on $100k borrowing is $600K plus deposit assuming the six times is gross income.

by IT GUY | 14th May 24, 7:18am 1715627936

https://www.oneroof.co.nz/news/middle-class-nightmare-unhealthy-debt-pr…

People cannot afford to buy at these levels.

by Averageman | 14th May 24, 7:29am 1715628553

Yep the tide is going out. The pretenders are stuck high and dry.

by OldSkoolEconomics | 14th May 24, 7:38am 1715629094

That's an interesting article.

It always fascinates me how some mid age people on big salaries max out on debt and buy outsize houses (instead of living well within their means and experiencing freedom from work).

Agree that we are on a different trajectory now... more things are changing than we realise and the economic norms of the last 100 odd years may be challenged (e.g. USA as the global military/economic powerhouse.. global peace.... oil underpinning currencies... AI driving massive change in jobs and business and more) thus we may need to be more cautious and switch investment strategies.

Long and short is that betting on expected cyclical changes in investments in property, conservative shares and interest rate settings may not be so straightforward.

by M0ralHazard | 14th May 24, 8:00am 1715630437

Oh no, those poor people, sending their kids to private school, spending $10k/mth on clothes, groceries & eating out, wanting to tell the bank to piss of because they have been asked to provide "them more bank statements and stuff" when they want to buy a $2m to $4m home

by Final Account | 14th May 24, 10:49am 1715640579

The $2M - $4M home was $350k - $500k 20 years ago.

If you're the next generation coming through working the same jobs for similar pay packets, why is it bad to want to live in the same neighborhood, in the same type of house, as the same people holding down the same type of jobs as you? Just 20 years later?

Ladder being pulled up and all that.

by Pascal Von Holden | 14th May 24, 8:45pm 1715676327

Yeah and now you need both parents working too.

by 1689 Baptist | 14th May 24, 7:31am 1715628674

Still modest climbs through most of the country. Auckland will be facing the bulk of the unemployment at the moment so is seeing a slight decrease. At the same time rents are increasing.

by TronMVP | 14th May 24, 8:25am 1715631925

James Wilson spitting out a few well worn cliches such as "inflation remains stubbornly high". Absolute nonsense.
And if you just read the headline you would think that property prices have dropped 5% in 3 months rather than rising 0.1%.

by Whatwillhappen | 14th May 24, 9:14am 1715634884

0.4% increases in property prices in a year where inflation will probably run at 4% is a real house price drop.

by TronMVP | 14th May 24, 11:07am 1715641645

Inflation was 0.6% for the 3 month period.

My point from my comment is that house prices are static, but if you only looked at the headlines then you would think prices have dropped rapidly over the past 3 months.

by Rumpole | 14th May 24, 10:13am 1715638405

Wellington will see reduction of jobs from Govt cuts and flow on effects to contractors and other hangers on.

by Sam Bridgman-Smith | 14th May 24, 7:54am 1715630068

I see no factors or justifications that may cause house prices to skyrocket again over the short term.

There have been no credible arguments from those who wish to see insane prices rises again (in my mind.)

The only exception could be another idiotic round of QE and low interest rates that inflate asset prices due to a deteriorating economy, but anyway who really knows?

However, over the longer term, what truely terrifies me for the sake of NZ society is the cashed up rich (whose wealth has increased more than ordinary people since covid) snapping up assets such as RE, should there be a significant drop in prices… thus pumping the asset prices and pushing them out of the reach of ordinary people.

The growing gap between the rich and the poor should concern us all (including the wealthy!) Wherever this happens worldwide, the social contract deteriorates.

Crime rises, diseases become more prevalent, education levels drops, innovation declines, the middle class gets gutted and the regions empty out to move to urban slums to service the needs of the rich.

On a longer timescale this is gradually playing out in New Zealand, you can see it in the declining quality of our institutions. We’re not as different as we’d like to imagine to other countries who are stuffing up their children’s future.

by earnedincome | 14th May 24, 8:34am 1715632459

However, over the longer term, what truely terrifies me for the sake of NZ society is the cashed up rich (whose wealth has increased more than ordinary people since covid) snapping up assets such as RE

I understand where you're coming from, but is it really so different from those with plenty of assets leveraging them to obtain more in a rising market? Two sides of the same coin maybe.

Essentially, I think the only way to deal with this sort of trend is to shift taxes from earned to unearned income. Lots of options on how to do that, just a lack of political will.

by Zaphod The Flatulant | 14th May 24, 7:58am 1715630316

QV is like a 3 month rolling average so isn't really showing what's happening today. REINZ out this morning will show how things are really fairing. Badly. And beyond "well it's always worse in Winter" bad.

by Rumpole | 14th May 24, 10:15am 1715638542

So many ignore the time gap between a sale agreement and settlement so figures are always behind the facts.

by WinHonourHelp | 14th May 24, 8:18am 1715631519

Friend in Palmerston North looking for first home said three houses on her shortlist have just been withdrawn from sale. I keep telling her there will be a motivated seller but seems there is still a glass floor amongst vendors.

by earnedincome | 14th May 24, 8:37am 1715632670

A glass floor doesn't sound very supportive.

by JustAnOpinion | 14th May 24, 8:38am 1715632708

Yep, it seems it's definitely a game of chicken out there. I think your advice to her is sound, there will indeed be a motivated seller but perhaps also tell her to be ready to pounce, she will not be the only one waiting.

by Averageman | 14th May 24, 8:50am 1715633400

Probably just a delay to wait for the tax free dale window to shorten up. Vos spevuvestors always pay their tax....

by delboy | 14th May 24, 10:27am 1715639228

Come July when the new bright line rules come in your friend may have a lot of houses on that shortlist.

by Black and White | 14th May 24, 8:41am 1715632873

trouble for the housing market over winter, says QV

That's an understatement its going be ugly and it needs to be.

Should never have gone where it did biggest Ponzi this country's ever seen.

Well put together by our friendly bankers.

What a mess.

by KH | 14th May 24, 8:43am 1715632990

I prefer it described as "..a great winter for the housing market.."

Prices falling is not a bad thing.

The house price explosion of recent years has been New Zealand's greatest social disaster.

by Piggy | 14th May 24, 8:49am 1715633347

The property market is proving to move remarkably resilient - it’s flat not in free fall.

by powerupkiwi | 14th May 24, 1:16pm 1715649408

Nominally flat. So pretty bad. Pretty much in free fall when compared to any other asset.

by IT GUY | 14th May 24, 9:11am 1715634700

April HPI MONTH ON MONTH Medium price

National Medium -1.2%

NZ ex AKL -1.7%

Auckland -1.9%

as expected all the spin is on the year on year numbers, a few more months like this and they will all be given back,

Auckland is falling fast now as winter arrieves

by Yvil | 14th May 24, 5:00pm 1715662823

Only a fool would compare April data with March data, which is the busiest month of the year. To get a real picture, you need to compare the same months from the previous year.

by delboy | 14th May 24, 9:15am 1715634918

The “Median price - REINZ” graph on this website shows prices increased a lot between 2020 and 2022 and now the prices are tracking back down to the long term trend line.

I think Auckland median price to be back to 2022 level by 2026.

by earnedincome | 14th May 24, 9:26am 1715635587

I think 2016 prices by 2026 is more likely - at least in Wellington where a lot seems to back around 2018-19 prices in real terms already.

by delboy | 14th May 24, 10:39am 1715639980

I think you’re right. The outlook for sellers in Wellington looks very bleak indeed.

by TommyYank-old | 14th May 24, 9:36am 1715636165

You say 2022 level-or is it 2020 level. That was a huge Covid Bubble that topped out in 2022-why would that hold?

by TommyYank-old | 14th May 24, 9:31am 1715635894

What's missing in this discussion about falling House Prices in Auckland is not the 12 month comparison but the 36 month comparison--that's where things get really ugly. With Average Price falls of up to 25% baked in that means the equity that buyers had during the "Covid Bubble" is long gone-while the cost of servicing a mortgage has tripled-rising from the go to 1.9% one year rates to the current 6.8% rates for a 2yr. That's an awful lot of hurt that a current buyer brings to the negotiating table.

And wait another 6 months for the painful awareness to sink into Vendors that there is no quick fix. Just ask the Irish or Americans how long it took for price recovery after the 2007 price collapse--the answer wasn't 2-3 years-more like 10 plus years.

by Rumpole | 14th May 24, 10:18am 1715638729

Japans took much much longer.

by Joker | 14th May 24, 9:35am 1715636159

We lost buying our next home by $10,000 to an investor who immediately listed it for rent. Cheers!

by TommyYank-old | 14th May 24, 9:38am 1715636305

True in some ranges-but that is not happening for Houses in the $2 to $3mil range where the drops have been massive

by Joker | 14th May 24, 12:45pm 1715647548

This website always talks about the housing market from a sellers perspective. A 'bad' market seems to actually be good for buyers and some headlines of that nature might be welcome

by Yvil | 14th May 24, 3:10pm 1715656206

This website is a financial website, Joker, helping people make money. So yes, if something goes down in value, it's reported as being bad.

by endlesslearner | 17th May 24, 11:10am 1715901005

Policy lags work both ways. Even if the RBNZ slashed rates to zero today, it wouldn't be an instant fix. We've not even hit peak unemployment yet, and non-performing loans have increased by about 75% over a year. For commercial real estate, that figure is around 265%. We're looking at a balance sheet recession where everyone will be too busy sorting out their finances. Remember, the RBNZ's interest rate hike from 0.25% to 5.5% is unprecedented, a 2100% increase! With all the debt accumulated, a deflationary bust isn’t just a possibility, it is highly likely, and when it hits, it'll hit hard