Hot on the heels of October’s 0.4% rise in property values, the CoreLogic House Price Index shows another rise in November, of 0.7%.
The net result is that average property values are now up by 1.1% over the past three months, and the annual change now sits at -4.5%, the softest annual decline since November last year (-2.9%).
From the peak to September 2023’s trough, values fell 13.2%. After the increases in October and November, values remain 12.3% down from the high, at $915,448.
CoreLogic NZ Chief Property Economist, Kelvin Davidson said that around the main centres, signs of the emerging upturn were widespread in November.
Auckland, Hamilton, Tauranga, Wellington, and Christchurch all saw monthly rises in the range of 0.7%-0.9%, while Dunedin rose by a pretty buoyant 1.9%.
“It’s no real surprise to see the second monthly rise in house prices for this emerging cycle, given that mortgage rates have shown clearer signs of peaking in recent weeks. Despite some elevated volatility in global financial markets, the labour market is still relatively robust, and net migration inflows remain very high,” Mr Davidson said.
“However, the market hasn’t exactly soared away just yet. While sales volumes have been growing steadily in percentage terms, it’s from a low base so that hasn’t translated into a surge in the number of deals. Plus, with the flow of new listings ticking along, we’re seeing a flattening and perhaps even a slight lift, in properties on the market in recent weeks. That may take a little heat out of prices as buyers benefit from more choice and vendors contend with a subtle rise in competition.
“Meanwhile, credit conditions also remain challenging. Even if mortgage rates don’t rise much further, or even dip a bit for the longer-term fixed rates, they’re still high – and serviceability testing remains a significant hurdle too. Loan to value ratio rules are quite a restraint on low-deposit lending as well, although first home buyers are certainly taking advantage of that speed limit where they can.”
Mr Davidson also noted that the now-formalised new Government may also bring a little more confidence to the economy and housing market, but he expects it will be a while yet until we have truly detailed housing policy framework.
“Any changes to the Brightline Test or rules relating to mortgage interest deductibility won’t happen overnight either. In any case, the restraint of high mortgage rates isn’t about to alter dramatically,” he said.
The growth in property values in Auckland over November was fairly consistent across the sub-markets, with North Shore up by a robust 1.8%, but Rodney, Auckland City, and Waitakere in a more measured range of 0.7%-0.8%. Franklin was a little softer, while Manukau and Papakura actually saw values drop in November.
“This month’s results serve as a further reminder that this upturn may not be all one-way traffic. The patchiness in property values by sub-region, even though wider market averages have started to turn around, could well remain a feature in the coming months, in Auckland and elsewhere too,” Mr Davidson said.
“Housing affordability is still stretched in many parts of NZ, and ‘higher for longer’ mortgage rates won’t do anything to ease that pressure.”
Wellington is another key part of the country where property values dropped significantly during the downturn, but have also started to turn around relatively promptly too.
“Lower Hutt and Porirua, for example, both saw average values rise by 1.5% in November, with the latter’s figure now up by almost 5% in the past three months. That momentum may not be maintained, but for now, Porirua is certainly showing some steady gains,” Mr Davidson noted.
Regional House Price Index results
Diversity in market conditions exists outside the main centres too, with Queenstown (3.2%) and Gisborne (1.9%) posting strong gains in November. Whangarei (-0.9%) and Rotorua (-0.6%) lagged behind, while Nelson and Invercargill were flat.
Mr Davidson said this just illustrates the variability that is evident from region to region, and which might stay in play in the coming months.
Property market outlook
While Mr Davidson said it seems pretty likely that property values will continue to rise in the coming months, increases may not be seen in every month or location.
“This ‘recovery’ could remain fairly subdued by past standards, given that housing affordability is still problematic, mortgage rates in general aren’t set to fall materially, and caps on debt to income ratios are still on the cards for 2024.
“We should also never lose sight of the mortgage repricing process that is still going on for existing borrowers, as they face up to finally seeing the interest rate they’re paying reach prevailing market levels over the next six to nine months. So far, this process has been very smooth. But it’s a lingering risk to watch, especially if we did start to see some job losses coming through in 2024,” he noted.
“I’m always conscious of the scope for housing activity and prices to move faster than anticipated, due to the emotional or human factor involved. But right now, it’s hard to see the market quickly shaking off the weight of high mortgage rates.”