The clash of rising interest rates on the housing market has been significant, according to new data showing that property transactions in New Zealand have dropped to their lowest level in nearly 40 years.
CoreLogic data shows that the number of homes sold in the 12 months ending in February 2023 was 60,859, the lowest 12-month total since October 1983. The number is down 32.7% from the prior year.
While February’s 4100 transactions were the fewest in any February since at least 1981, a decrease of 33.1% from the same month a year ago. CoreLogic attributes the downturn to rising interest rates and stricter loan regulations.
The statutory currency rate in New Zealand was raised by 50 basis points in February by the Reserve Bank (RBNZ).
Since October 2021, the RBNZ has increased the basic interest rate in New Zealand by 450 basis points, bringing it to 4.75 percent.
According to CoreLogic’s research, while property prices in Christchurch are down 4.7% from their zenith, they are down only 19.7% in Wellington.
It comes as the New Zealand real estate market continued its downward trend from its high in March 2022.
CoreLogic discovered that property prices have decreased by an average of 1.5% over the past three months and have decreased by 9.5% since they were high in March of 2022.
Kelvin Davidson, the chief property analyst at CoreLogic NZ, has commented on the sales numbers, noting that they are remarkable and demonstrate how calm the market is.
Because of the persistently low jobless rate, “few sellers are in a hurry to sell,” and “those buyers who have secured finance know that they can take their time too,” according to Davidson.
According to the study, the Nelson/Tasman area and Taranaki contributed to a 16 percent increase in active postings since last year.
First-time purchasers pull back.
CoreLogic discovered possible signs that first-time homebuyers are leaving the market.
While first-time purchasers make up a sizable portion of the market, they may need to catch up. Relocating owners account for another 27 percent of the transactions.
As Davidson said, “their share of purchases edged lower in February, so it’s something to watch.” “There may now be signs of their interest rate limits being reached. Or it could be that they’ve actively pulled back while waiting for prices to fall further.”
Although mortgage rates are beginning to level off, Davidson is still optimistic that the housing market decline will finish this year.
He noted that the formal currency rate might not increase to 5.5 percent as planned because of recent poor GDP statistics and worldwide financial problems.
According to Davidson, “the case would be building for this house price downturn to find a floor in 2023 if mortgage rates start to edge lower, net migration continues to rise, and investors start to see value again.”
