New Zealand’s housing market suffers biggest price fall on record

On Wednesday, the Real Estate Institute of New Zealand (REINZ) released its May price results, which reported that median prices nationally tanked by 4.0%, taking cumulative losses since November 2021 to 9.2%.

In a similar vein, the Trade Me Property Price Index for May also recorded the steepest monthly decline on record, with national average prices falling 2%:

Trade Me Property sales director Gavin Lloyd said it was the largest month-on-month drop the website had recorded, and showed the tide was turning after relentless price growth over the past couple of years.

“Often, prices cool a little as we go into the colder months, but last month’s data is beyond anything we’ve seen in previous years,” he said. “The whole market is in flux, and we’re seeing this reflected in every corner of the country.”

The fall in prices follows the largest lift in the number of homes for sale on record, which has eliminated buyers’ “Fear of Missing Out” (FOMO):

Nationwide, the number of properties for sale increased by 48% in May compared to the same time last year. That was, again, the largest percentage jump recorded by Trade Me and resulted in a record-breaking number of listings.

Every region had more properties for sale in May than they did at the same time last year…

Lloyd said in addition to the cooling prices, demand for properties dropped by 9% nationwide, compared to the same time last year…

“Having more options than ever before is taking the pressure off buyers and eliminating the fear of missing out that was behind much of the price increases over the past couple of years…

“As a result, the market has seen a remarkable shift, putting buyers well and truly in the driver’s seat.”

Trade Me’s results correspond with the REINZ’s June survey of licensed real estate agents, which reported widespread price falls amid vanishing FOMO:

Price falls across New Zealand

Kiwi buyers go cold on New Zealand property.

In short, New Zealand looks to be experiencing a sharp housing correction on the back of 1.75% of official interest rate hikes by the Reserve Bank since October 2021.

The correction will intensify if the Reserve Bank follows through with its ‘forward track’ guidance and lifts the official cash rate from 2.0% currently to 3.9% by September 2023. If that happens, New Zealand faces a full blown house price crash.

Unconventional Economist
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  1. The Travelling PhantomMEMBER

    RBNZ are visionaries and pioneers,
    It takes lots of courage to do what they are doing.
    Hopefully their work won’t get derailed

  2. The Travelling PhantomMEMBER

    The fall over 8 months is less than 10 percent, still a correction and might stabilise around 15% decline and the market finds a floor.
    Just flesh wound in the housing market

    • kiwikarynMEMBER

      Considering that prices went up 10% in the last 3 months of 2021 alone, this merely takes us back to Sept 2021. Still not seeing any bargains out there. I am seeing a lot of brand new and half built townhouses hit the market, as desperate developers see the window for selling for more than it cost them to build fast disappearing.

  3. There’s still no Fear out there.
    Only a tiny few believe that this is anything but normal – “It’s always bounced back, and it will this time. Nothing unusual going on”.
    When Fear arrives, we’ll all know it. And that looks like it’s many OCR rises away at this stage.

      • BubbleyMEMBER

        5 stages of grief
        1. Denial – “It will bounce back”
        2. Anger – “Why isn’t the government doing something?!”
        3. Bargaining – “If we can just hold on a bit longer, it will be ok”
        4. Depression – “Its not ok”
        5. Acceptance – “We have to sell at a loss”

        And then you meet people who never ever get over it. I met a guy in the 2000’s who was till angry at Labor for interest rates reaching 17% two decades earlier.

    • BoomToBustMEMBER

      Interesting views, I believe we are the same here is Oz, once the dam bursts and people understand what is headed there way the fear will be immense.

      It’s also interesting to note that everyone cheers on financial destruction with house prices rising 10-20% per year thinking nothing will ever come of it but good.

  4. Hugh PavletichMEMBER

    New Zealand and Australia housing: It’s a rough road ahead to restoring ‘affordable’ 3.0 median multiple / times household earnings …

    … with New Zealand currently on a suicidal 8.6x median multiple / times household earnings …

    Median multiples – Interest Co NZ

    … while across the United States 186 metros the average median multiple is 4.6 … just released …

    Demographia U.S. Housing Affordability – 2022 Survey Released … Wendell Cox … New Geography

    Honolulu Challenges World’s Priciest Cities for Housing Unaffordability … Hawaii Business Magazine

    … following the Demographia International Survey release March …

    Demographia International Housing Affordability Survey – 2022 Edition … Urban Reform Institute & Frontier Center for Public Policy

  5. The fall in house prices in real terms over the past six months using the HPI – which is a better indicator than the median – is >20% annualised, which marks it out as the sharpest decline in two generations (I have data back to 1970 from the BIS).

    And this is just the beginning. Households haven’t yet felt the full impact of mortgage fixings, nor the rise in wholesale funding rates. This week NZD 1y1y IRS yields breached 5%, thats consistent with one year fixed mortgage rates climbing to >7% in one year. I’ve modelled first home buyers income statements and I have no idea how they make their mortgage payments. The numbers just don’t add up. Consumption will be torched, and delinquencies are set to rise.

    But the Government and the Banks will tell you its all fine…

  6. elasticMEMBER

    The insidious thing about inflation is that the calculations for households managing a 2.5% rise in IRs was based on household spending prior to this bout of inflation which has caused household expenses to skyrocket.
    So a 10% rise in expenses has eaten away their ability to manage the surge in IRs.

  7. Hugh PavletichMEMBER

    Do not under – estimate the political and commercial impacts of the gib board / plaster board fiasco in New Zealand … check out these MB links … for starters …

    New Zealand: The Ardern government is losing support because of its failure to deliver on promises …

    With Bloomberg reporting today ( behind paywall ) ‘China’s Surprise Economic Rebound in May Propelled by Coal’ that in China trucking is down 20% and new property construction starts down a staggering 42% year on year … what other building products … beside just plaster board … is the New Zealand construction industry sourcing at internationally competitive prices from Asia / China ?

    The Economist had earlier reported it estimated China issued about 15 million residential consents / approvals in 2020 … and with its population about 1.4 billion this suggests a consent / approval rate per 1000 population per annum of 10.7 … higher than New Zealand’s and substantially higher than Australia’s.

    The better quality Thai plasterboard is about a third New Zealand’s ex – factory price … about $NZ 8 per sheet in comparison to about $NZ 25 …

    Gib crisis: 75 businesses seek alternative plasterboard products from Thai importers … Anne Gibson Property Editor … New Zealand Herald
    … behind paywall …

    Hope on the building supplies front … but sadly … the ports and shipping performances are hopeless … why ? …

    … According to the recently released World Bank / S&P Global 370 ports performance report, at a national level, New Zealand’s ports are the worst performers in the world, while China and the Middle East are the best …

    Why does it take 13 weeks longer to ship to New Zealand than Australia? … Daniel Smith … Stuff New Zealand

    The (370) Container Port Performance Index – 2021 … World Bank / S&P Global … pdf

    The distortions within the New Zealand economy can only be described as ‘widespread and profound’…. read more via links above … ..

  8. – What happened to short term rates in NZ ? Is there any chart available that shoiws what the current rate is ? Perhaps the stock exchange in NZ provides such a chart ?

  9. kiwikarynMEMBER

    There are a couple of factors that are going to make the NZ housing crash so much worse than Australia. Its the problem with the “Mum & Dad” property investors. In NZ you can now no longer deduct interest (so you are paying tax on gross rent) and you cannot negative gear rental losses against personal income. So as interest rates and tax payments rise, small investors are going to come under much greater pressure than Australian ones. For investors, even if interest rates are the same as in 2016 its a totally different story as 2016 investors didnt have to pay tax if they made a loss on their rental property, and they reduced their personal tax bill by offsetting those losses against their personal income. Not the case in 2022. People are just starting to run the numbers now and property groups are full of people freaking out as their previously cashflow positive properties now drop into the negative (and its a double whammy if they have their own home mortgage to pay as well).

  10. greedypuppyMEMBER

    karyn – it will be interesting to see how this plays out…my friends in NZ are busy convincing themselves that it will be worse in Australia -either way it could be ugly -unless someone figures out how to kick this can even further down the road

    • kiwikarynMEMBER

      Smart Australian property investors buy residential property through a self managed super fund, where they pay 15% tax (or zero tax if retired) on rental income, capital gains tax is only 10%, and any losses on sale of the property are unrecoverable against other assets (so basically super funds can hand the keys back to the bank and walk away).

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