The Real Estate Institute of New Zealand (REINZ) reports that rising interest rates are deterring purchasers from entering the housing market, even though there are almost 75 percent more homes available than at the same time last year.
It has issued its October statistics, which indicate a 1.9% rise in the national median price compared to September but a 7.5% decline year-over-year. The monthly national median price was $825,000.
The institute’s House Price Index (HPI), which gauges the changing value of residential property throughout the country, showed an annual decline of 10.9%, or 12.4% from its November 2021 high.
According to analysts at Kiwibank, this was the largest decline documented by the institution since records started in the early 1990s. “It does not seem like home prices have reached the bottom yet.”
In comparison to the prior year, sales decreased by 34.7%. The number of available properties increased by 74.7%.
In October of last year, the median price in Auckland plummeted by 12.7%, from $1.249 million to $1.09 million.
For the first time since August 2008 to January 2009, the area has seen six consecutive months of annual median price declines.
In October 2022, the median price in Wellington decreased by 17.2% yearly, from $1 million to $880,000.
Jen Baird, chief executive officer of the Real Estate Institute, emphasized that the year-over-year comparison includes when Auckland was released from lockdown restrictions.
“In October 2021, market activity was affected by greater confidence around the lifting of lockdown restrictions in Auckland and the postponement of the implementation of revisions to the Credit Contracts and Consumer Finance Act (CCCFA) from October to December,” she added.
“Capable of transacting and eager to move before the implementation of stricter financing limits, consumers rush to the market, adding to a feeling of urgency that is reflected in REINZ property statistics for October 2017 and is evident in our yearly comparisons.”
However, she said that other factors were influencing the market this year.
Increasing interest rates, an increase in the cost of living, tax laws, property regulation, and stricter financing conditions hindered buyer activity.
“In September, the statistics indicated that the typical spring upswing was restrained, and the situation has remained unchanged through October. Nationally, sales are down 34.7% annually and 4.2% month-over-month.
“Every year, we are comparing to a time of increased activity. The actual figures show a 4.3% decline in activity from one month to the next. Still, after controlling for seasonality, we observe sales are down 9.5% — October performed worse than anticipated compared to September.
People continue to make life choices, and properties continue to change hands. Nonetheless, buyers and sellers are exercising prudence and evaluating their alternatives.”
She said there were indications that first-time homebuyers were “dipping their toes in the water” to take advantage of the increased number of houses on the market and banks’ return to financing.
“While this is good news, future hikes in interest rates are putting a damper on the purchase ambitions of this buyer group, and their enthusiasm has yet to translate into sales activity. In the meanwhile, indications from salesmen around Aotearoa indicate that investors are continuing to pull back,” she added.
The experts from Kiwibank said that the price declines might be more severe if the labor market was not so robust.
According to the Reserve Bank’s latest Financial Stability Report, the proportion of non-performing mortgages held by banks is negligible. Given that an increasing, although modest, proportion of mortgage holders is expected to be in negative equity, this is a good trend. Despite this, it is anticipated that the unemployment rate would progressively climb over the next year as the Reserve Bank’s policy tightening cools the economy and inflation.”
In October, the typical number of days to sell a house in New Zealand was 44, up ten days from October 2021. Properties were on the market for three days less each month.
Annually, the number of new listings in the United States decreased by 4% to 9289, a decline of 4% from the previous year. New Zealand, excluding Auckland, grew about 3.3% annually.
According to ASB economists, home values remained 24% above pre-recession levels.
However, they said there was space for more weakening.
“From their peak in late 2021, house prices are projected to decrease by double digits – maybe as much as 20% in nominal terms, depending on the examined data series. This decline might be substantially greater in actual terms due to persistently strong inflation.”
They estimated it may be mid-2023 before “preliminary signs of recovery.”
