New Zealand’s house price crash accelerates

The Real Estate Institute of New Zealand (REINZ) has released its house price results for April, with median prices declining another 1.7% over the month to be 4.9% lower than November 2021:

New Zealand house prices

New Zealand house prices are falling.

In dollar terms, the median New Zealand house price has declined by $45,145 from its November 2021 peak, from $920,145 to $875,000.

The declines have been led by Auckland, where house prices fell 2.5% over the month to $1,170,000 and are now 10% ($130,000) below the city’s November peak of $1,300,000.

Sales volumes have also plummeted, down 30.1% year-on-year across New Zealand:

New Zealand property sales volumes

Property sales volumes have plummeted across New Zealand.

Commenting on the results, REINZ CEO Jen Baird noted:

“We’re now in the phase of the property cycle where demand has weakened, sale counts are down but prices remain high. We’re seeing a slowdown in activity, there is more stock staying on the market for longer, and while annual price growth is more moderate, the month-on-month trend shows a fall in median prices…”

“Falling attendance at open homes and auction rooms, and a decrease in buyer enquiries were reported across New Zealand… Affordability, uncertainty and changing financial conditions remain primary concerns. Tighter lending criteria, LVRs, and increasing interest rates coupled with inflation…”

“Increases to the OCR, most recently by 0.5% in April, have further impacted affordability, and with the cost to own increasing, property may seem less attractive…”

“Fear of overpaying has overtaken fear of missing out, as potential buyers take the time to consider the financial environment and their increased options on the market”.

The REINZ’s latest agent’s survey, released earlier this month, was even more bearish. Real estate agents noted that fewer people are attending open homes and auctions, with a record 60% of agents also reporting that prices are falling in their areas of operation:

New Zealand buyer sentiment

New Zealand buyer demand evaporates.

Agents also reported collapsing demand from investors and first home buyers, alongside a near complete disappearance of FOMO in the market.

Clearly, the New Zealand house price collapse has begun. How far prices fall will depend on how aggressively the RBNZ lifts interest rates.

Unconventional Economist

Comments

  1. Goldstandard1MEMBER

    Next stop: Australia. Auctions are weak weak weak so should be a nice fall already. Inner melb looks down at least 5%-10% based on the 5 auctions I’ve seen in the last 2 weeks. One of those weeks was just the THREAT of an interest rate rise with ppl saying ‘there is no way the RBA will do that in an election month’.

    So my personal feeling is that all the sticky tape and glue has come off now, and Labor will win in a landslide to deal with the general horrible state of things, then Libs can blame them for the next 4 years which will be, well, horrific economically, jobs and property values. But it needs to happen.

    • Guess it was Kevin 07 that came it to manage the GFC crisis, it’ll be albo & team restructuring the banks when they get into crisis

      Bail in v Bail out

      I think if it’s labour it’ll be a bail in – they’ll protect $ to $250k but don’t believe above that, depends how bad things get

      • Camden HavenMEMBER

        Currency swaps with US saved our banking system in GFC not so much this time. Chinese investors in Australia and New Zealand will get fleeced,

  2. Interest rates are peaking here after a pretty aggressive run since last August
    US 2 year from 0.1 to 2.8 Fed really should have been following but always late

    I said to you guys a year ago that anyone probably 54 years old min knows what 15 to 20% interest rates were like to live through
    I was closer because my first job was on a bond trading desk in the financial markets so saw first hand bank bills at 19%
    Over the next several years 4/5 etc, we are headed back there
    What are we now 5% 5 year fixed 4.5% 3 year fixed
    We won’t go in a straight line we will have reduction in rates for periods but we are moving into a decade of high commodity prices shortages – commodities super price boom that is going to take interest rates to above 10%

    We will retrace house prices back now
    Pre Covid (-20%)
    2016 another 10%
    Think next was 2012 another 10%

    What’s that 40% off back at 2012 but we will head

    Prices AUST NZ will be back to early 2,000 levels again

    The issue is material costs so high & interest rates high
    I don’t know how you will be able to borrow & build

    Think this scenario might put the banks out of business

    Get the mortgage calculator out

    If rates are 6 to 7% minimum & building costs are 30 to 50% more min & they will be how can anyone borrow money to build

    I don’t even think the maths works of the land is free

    Think you’ll find land prices will fall big time

    Something has to give

    Guess save up & build the house yourself slowly it’s what the generations above us did

    • Jumping jack flash

      “Guess save up & build the house yourself slowly it’s what the generations above us did”

      Agree this is the ideal.
      For it to return to this, debt must be removed from the equation. If the only money people had available to buy a house with was that which is earned and saved in a reasonable amount of time, then house prices would have no choice to be priced according to earning and saving capabilities.

      The debt creates a layer of false demand and provides an availability of additional money that is not actually real, and not actually money because this “special” money actually costs money while it exists.

      Spending debt on anything that does not add to productivity in the traditional sense (and not measuring “productivity” with debt spending) is never a good idea for anyone – except those who create the debt that is spent of course.
      Once those debt-factories are given control, it doesn’t take too long before we base our entire economic model around debt spending!

      Oh yes, welcome back!

      • Debt is going to become very expensive, it’ll be hard to even borrow to make the numbers work to build & our banking sector will be much smaller & also much smaller component of our economy.
        We are going back to a culture of saving rather than borrowing

        • Absolute BeachMEMBER

          I hope so Mr Bcnich. But sadly the tax incentives to leverage into property are appealing, and historically lucrative. This is likely put a floor under property until neg gearing, etc are removed as an option. It is counter to the best interests of country as a whole, and particularly to first home buyers. It also reduces capital available for investment in true productive activities. I would vote for a party that ends the practice. Shame on Labor for dropping the policy.

        • Camden HavenMEMBER

          What are the reasons for your opinion? And who /what makes this happen?

          For example, is it a geopolitical strategy or a counter move on part of the US?

    • Guess save up & build the house yourself slowly it’s what the generations above us did

      Every citizen should receive a grant of their fair share of land.

      Every citizen should receive permission from govt to live on that land as they require. eg tent, caravan, garage

      Every citizen should receive permission from govt to build structures that are reasonably strong (ie comply with reasonable structural standards) without govt meddling.

  3. kiwikarynMEMBER

    On the other side, I have noticed a big drop off in new listings. So once stock on market is absorbed (at lower prices) then there is a chance the market stablises. Plus the CCCFA fix comes in next month.

    • It’ll stabilise initially but the issue in NZ is when the Aust banks get into crisis, they’ll just pull the plug on NZ
      NZ are going to get hit very hard in this crisis, not yet though just more down but there be a point it’ll just go straight over the cliff
      No bank
      No lending
      No buyer

      Absolutely nothing you can do

  4. Hugh PavletichMEMBER

    Not just housing …

    ‘20% occupied:’ Huge drop in use of office space nationwide … Miriam Bell … Stuff NZ

    https://www.stuff.co.nz/business/property/128545446/20-occupied-huge-drop-in-use-of-office-space-nationwide

    … access quickly other NZ property news on Stuff …

    https://www.stuff.co.nz/business/property

    … and recent real estate related MB postings …

    https://www.macrobusiness.com.au/2022/05/investors-grind-first-home-buyers-dirt/#comment-4272930

    New Zealand: REINZ sales down by a third compared to April last year, national median price down by $45,000 from peak …

    The housing market could be in for a long cold winter as sales volumes and prices took a hammering in April … Greg Ninness … Interest Co NZ

    https://www.macrobusiness.com.au/2022/05/investors-grind-first-home-buyers-dirt/#comment-4272886

    United States …

    Average U.S. mortgage interest rate rises to 5.53%, applications up …

    Average U.S. mortgage interest rate rises to 5.53%, applications up … Reuters / Yahoo Finance

  5. Hugh PavletichMEMBER

    Queenstown and Wānaka house sale prices tumble – but no trend yet … Debbie Jamieson … The Press / Stuff NZ

    https://www.stuff.co.nz/life-style/homed/housing-affordability/128624689/queenstown-and-wnaka-house-sale-prices-tumble–but-no-trend-yet

    Property prices drop in New Zealand, house sale activity plummets – REINZ report … Newshub

    https://www.newshub.co.nz/home/money/2022/05/property-prices-drop-in-new-zealand-house-sale-activity-plummets-reinz-report-says.html

    House sale volumes tumble 35.2 per cent, prices fall in market turnaround: REINZ data out … NZ Herald

    https://www.nzherald.co.nz/business/house-sale-volumes-tumble-352-per-cent-prices-fall-in-market-turnaround-reinz-data-out/5I3J3LYKTZ5LF5E6ZGSMA46YWY/

  6. Hugh PavletichMEMBER

    It’s a tale of three cities: House price trends diverge across Auckland, Wellington and Christchurch … Miriam Bell … Stuff New Zealand

    https://www.stuff.co.nz/life-style/homed/real-estate/128625132/its-a-tale-of-three-cities-house-price-trends-diverge-across-auckland-wellington-and-christchurch

    House price movements in the country’s largest urban centres over the last year have been remarkably different, Infometrics says.

    The housing market slowdown is entrenched, and the latest Real Estate Institute figures showed demand had weakened, sales were down and properties were taking longer to sell. … read more via hyperlink above

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