A Quiet Spring for Sure, but there are Fresh Shoots
The usual spring uplift was subdued, but an uptick in activity is expected as motivated vendors bring their properties to market before the end of the year, reports Jen Baird from REINZ.
8 January 2023
Through 2022 we have seen market dynamics shift and settle at a more moderate pace.
Over the three months ending September 2022 (Q3), prices eased, sales activity was down and inventory levels remained elevated as properties stayed on the market longer, with median days to sell high.
Market by numbers
In Q3 2022, the national median property price was $810,000, a decrease of 5.3 per cent, from $855,000 over the three months ending June 30 2022 (Q2). Year on year, there was a 1.7% decreases in median price – from $824,000 in Q3 2021.
Two regions saw a quarter on quarter increase in median price; Taranaki was up 1.6% from $620,000 to $630,000, while West Coast was up 0.9% from $337,000 to $340,000. All other regions saw a decrease in median price quarter on quarter; Wellington saw the greatest decrease down 10.4% from $892,880 in Q2 2022 to $800,000.
The number of properties sold across New Zealand was 14,802 over Q3 2022, compared to 15,751 over Q2 2022. Inventory levels sat at 25,900 compared with 26,023 in Q2 2022, and the median days to sell increased 6 days, from 42 in Q2 2022 to 48 in Q3 2022. Properties are staying on the market longer.
The REINZ House Price Index (HPI), which measures the underlying value of property, showed a 3.3 per cent decrease over this quarter, and in September the HPI was down 12.6 per cent from its peak in November 2021. All but four regions across NZ saw negative HPI movements, indicating that in many regions buyers are not paying as much as they were for the same type of property.
Several fundamentals are affecting the market. Last year, demand far outweighed supply, and a sense of urgency propelled the market. Now the scales have tipped the other way; we are seeing more properties available to purchase, at the same time there are several barriers to entry for potential buyers as they continue to grapple with increasing interest rates, tighter lending criteria, changes to taxation of residential investment property and concerns around the cost of living.
Annual inflation has hit 7.2 per cent, and the Reserve Bank has increased the official cash rate to 3.5 per cent, and is expected to increase it to 4.0 per cent by year’s end, with more increases to come in 2023.
Many say mortgage rates are yet to peak and some banks are increasing their fixed mortgage rates.
However, there remains a strong labour market in NZ. And while lending criteria is tight, banks are willing to lend. Agents report signs of more buyers dipping their toe in the market, although this has yet to translate to sales activity.
Those for whom affordability has been a barrier to entry are finding opportunity in a market where there is more choice, less competition and easing prices. In some areas agents note more of this buyer group returning to take advantage of property options, and increased first home grant house price caps. While prices have eased, the benefit to first time buyers is balanced with interest rates, but as they continue to increase that chink in the property market will close.
Investors continue to hang back. However, our monthly survey of agents, conducted with Tony Alexander, suggests a more positive trend emerging in this buyer pool too. In September, a net 28 per cent of agents said they were seeing fewer investors in the housing market looking to buy, compared with a net 68 per cent in February.
Where to next?
The September figures indicated the usual spring uplift was subdued. As we edge towards the close of the year we expect an uptick in activity as vendors motivated to sell this year bring their properties to market. And there are a few signs to suggest this may well be the case.
As the market settled into this phase of the cycle, people hit pause to wait for a more favourable market: buyers waiting for a deal, and vendors reluctant to be that deal, slow to lower price expectations. Now, vendors are increasingly understanding and willing to meet the market. People are less likely to hold off listing, and agents say they have seen an increase in appraisals compared to earlier this year.
There are still challenges, but life goes on, people need to make decisions, whether that’s upsizing, downsizing or leaving the city behind.
Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.