New Zealand house prices plummet

CoreLogic has released its June house price results for New Zealand, with dwelling values nationally recording their fastest quarterly decline since February 2009 following three consecutive 0.8% monthly declines:

The national measure of property values fell a further -0.8% in June, completing a hat-trick of months at the same rate of decline (-0.8% in both April and May). The quarterly fall of -2.3% is the biggest drop over a three month period since February 2009, which is just prior to when the market bottomed out (at an average value of $372,681 in March 2009) following the Global Financial Crisis (GFC).

New Zealand house price index

As shown above, the largest quarterly declines in values were recorded in Auckland (-4.9%) and Wellington (-4.7%).

Commenting on the result, CoreLogic NZ Head of Research, Nick Goodall, noted that the housing market is facing more dangerous conditions than in the late 2000s:

“While the economic and lending environments are remarkably different between 2008 and 2022, housing affordability is more thinly stretched, and interest rates are rising, not falling like in the late 2000s. Under these circumstances it is difficult to foresee any respite for falling house prices in the near term”.

“Affordability constraints coupled with higher interest rates and tighter lending conditions are likely to keep a lid on housing demand over the coming months and probably until interest rates start to fall again. Although a drop in housing prices will support an improvement in affordability, higher mortgage costs and stricter lending policies will probably outweigh the renewed affordability advantage.”

Indeed, mortgage rates have risen sharply across the spectrum, as illustrated in the next chart:

New Zealand mortgage rates

New Zealand’s housing indicators are also wall-to-wall bearish.

Given the Reserve Bank’s ‘forward track’ guidance tipped that the official cash rate will rise from its current level of 2.0% to 3.9% by June 2023, heavy house price falls seem inevitable.

Unconventional Economist
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Comments

  1. pfh007.comMEMBER

    Markets going up and markets going down!

    Quite shocking isn’t it.

    Everyone knows that some markets are only supposed to go up.

    Especially those that are manipulated by Central Banks.

    How could they do this to the right kind of people?

    Pass the smelling salts.

    • Jumping jack flash

      House prices are the V in LVR.
      The only thing that distinguishes good debt from bad is the result of the calculation L/V * 100. Its not too hard. Even a banker can manage this, or at least they could back in 2008.

      L doesn’t usually change by much at a time, in fact for all intents and purposes it is pretty much fixed.

  2. And the author of the “wall to wall bearish ” article more recently commented “The period of falling prices is likely to be over
    quite quickly.”

    • kiwikarynMEMBER

      Every man and his dog in the North Island is buying houses in Christchurch because they are still so much cheaper than Wellington and Auckland. Especially investors buying new build townhouses because they are the only things still getting interest deductibility. Christchurch now has the highest rate of residential consenting in the country, and there are already signs of desperate developers who cant offload the ones already built (or half built as they are now trying to sell those too). But the stock of nice family homes in Christchurch is very low, listings are less than half what they were a couple of years ago, and prices are still playing catch up with the rest of the country (after many years of stagnant or falling prices due to huge building programme undertaken after the earthquake).

      • I live in Wellington and am now getting targeted ads from developers trying to sell crap.
        No way I’m paying $1.5m for a townhouse when I can buy a freestanding home a street away for less.

        Really nice homes still selling well and quickly however.

  3. Hugh PavletichMEMBER

    Compare the deflation velocities of the Australian and New Zealand bubbles with earlier deflating housing bubbles, bearing in mind the ‘median multiple stretch is way worse with the current New Zealand and Australian housing bubbles than the earlier ones … as Core Logic notes too …

    Housing Bubbles Wikipedia (check out historical housing bubbles deflation velocity)

    https://en.wikipedia.org/wiki/Housing_bubble

    … and too … Stats NZ Building consents issued: May 2022 ( check in particular ‘consents rate per 1000 population per annum’ performance … and ask economists to compare with all others in the OECD. Note too … the rate for Canterbury is about the all time peak reached in year ending Dec 1973 at about 13.5 / 1000 … yet to be picked up by local economists and media)

    https://www.stats.govt.nz/information-releases/building-consents-issued-may-2022/

    Bloomberg recent OECD Housing Report … with New Zealand the riskiest housing market … This table has yet to be reprinted by the New Zealand heritage media. Why ?

    https://www.bnnbloomberg.ca/world-s-bubbliest-housing-markets-are-flashing-warning-signs-1.1782289

    Demographia International Housing Affordability: All Editions ( access too ‘Interest Co NZ Median Multiple’ and Demographia United States Housing Affordability Survey 2022)

    http://www.demographia.com/db-dhi-index.htm

  4. Hugh PavletichMEMBER

    Considering residential rental trends … New Zealand and the United States …

    … New Zealand …

    Rental supply spikes while demand dwindles … Sally Lindsay … Good Returns

    https://www.goodreturns.co.nz/article/976520460/rental-supply-spikes-while-demand-dwindles.html

    Across the country the number of properties listed for rent surged 12% to an all-time high year-on-year in May, according to Trade Me’s latest rental price index but demand fell 8%.

    There were significant regional differences in the figures. Wellington’s listings lifted 45%, followed by Marlborough 24%, Auckland 16% and Manawatu/Whanganui 5%.

    However, listings in Northland, Waikato, Hawke’s Bay, Taranaki, Nelson-Tasman, Otago and Southland dropped compared to a year ago, while there was no change in Canterbury.

    All regions apart from Canterbury and Southland had a drop in demand from prospective tenants, with the biggest declines in Nelson/Tasman, down 28%, Northland 19%, and Taranaki 15%. Southland, up 8% and Canterbury, up 21% were the only regions to see demand for rentals climb when compared with May last year.

    The rental market is mirroring the property for sale market in May, with nationwide supply up 48% year-on-year, while buyer demand dropped by 9%.

    Rents drop for the first time this year … read more via hyperlink above …
    .
    .
    … United States …

    Rent Prices Cool The Most In These Five Cities … Zumper / Zerohedge

    https://www.zerohedge.com/markets/rent-prices-cool-most-these-five-cities

    Amid a historic stretch of inflation over the last year, the cost of housing (especially rent) has been one of the most significant pressures on household finances.

    The good news from the National Rent Report for June 2022 from Zumper, an online platform for rental searches, shows a long-awaited slowdown in rents arrived in June.

    Zumper’s National Rent Index for a one-bedroom only grew .5% in June over the prior month, while two bedrooms are down 2.9%. This is “a sign that rent hikes are beginning to slow,” Zumper said in the report. … read more via hyperlink above …

  5. Add in CPI of 1.5% for the quarter and Auckland is down 6% in real terms; annualised -26.2%.

    And given the lift in rates since end February, mortgage resets and rising property inventory for sale and its a recipe for an acceleration in weakness.

  6. Hugh PavletichMEMBER

    Employers and Manufacturers Association says NZ’s high cost of living, housing putting overseas workers off … Ireland Hendry-Tennent … Newshub

    https://www.newshub.co.nz/home/new-zealand/2022/07/employers-and-manufacturers-association-says-nz-s-high-cost-of-living-housing-putting-overseas-workers-off.html

    The Employers and Manufacturers Association says New Zealand’s high cost of living is putting off overseas workers.

    It comes as industries across the country struggle with dire staffing shortages. Healthcare, agriculture, teaching and hospitality are being hit particularly hard.

    Speaking with AM on Wednesday National leader Christopher Luxon warned if the worker shortages aren’t fixed, New Zealand’s international reputation could be damaged.

    “The problem is that many of our tourism restaurants across New Zealand, our tourism attractions are actually not operating at full capacity.

    “It’s a real challenge and it won’t take much for some bad experiences to lead… New Zealand gets a bad reputation for poor service,” he said.

    But it seems our reputation might already be in trouble – but not in the way he warned.

    Earlier on Wednesday, head of advocacy and strategy at the Employers and Manufacturers Association (EMA) Alan McDonald said the country’s high costs are putting potential migrants off.

    “I think we’ve probably lost our lustre as a great place to come,” McDonald told AM’s Ryan Bridge. … read more via hyperlink above …
    .
    .
    … According to the IPSOS NZ Issues Monitors immigration is not a major issue with New Zealanders … No 16 of 20 at 4% (Page 7) …

    17th Ipsos NZ Issues Monitor – June 2022

    https://www.ipsos.com/en-nz/17th-ipsos-nz-issues-monitor-june-2022
    .
    .
    New Zealand House Prices Drop The Most in 13 Years as Rates Rise … Matthew Brockett … Bloomberg

    https://www.bloomberg.com/news/articles/2022-07-05/new-zealand-house-prices-drop-the-most-in-13-years-as-rates-rise

    New Zealand house prices fell the most in 13 years in the second quarter as the central bank raised interest rates aggressively to curb inflation.

    Prices declined 2.3% in the three months through June, CoreLogic New Zealand said Tuesday in Wellington. That’s the biggest quarterly drop since early 2009, when the economy was in recession due to the global financial crisis. Prices fell for a third straight month, while the annual gain of 12.4% was the lowest since late 2020.

    “As the downturn sets in, and with interest rates set to rise further, greater consideration is now being given to how long and how far will this go,” said Nick Goodall, head of research at CoreLogic NZ. “Affordability constraints coupled with higher interest rates and tighter lending conditions are likely to keep a lid on housing demand over the coming months and probably until interest rates start to fall again.”

    The Reserve Bank is expected to raise the Official Cash Rate by half a percentage point for a third time next week, taking it to 2.5%, and further hikes are predicted as it seeks to quell inflation. That’s seen mortgage interest rates more than double over the past year. Economists are forecasting house prices will fall about 10% this year and decline further in 2023. … read more via hyperlink above …
    .
    .
    Kiwis dream of buying homes but feel trapped in the rental system, report shows … Melanie Earley … Stuff NZ

    https://www.stuff.co.nz/life-style/homed/renting/129108985/kiwis-dream-of-buying-homes-but-feel-trapped-in-the-rental-system-report-shows

    • kiwikarynMEMBER

      New Zealand is still talking about lockdowns and going back into “RED” restrictions due to winter flu. The border is still not fully open, and may always be at risk of another shutdown. Immigrants could be shut off from their friends and family for years to come, who wants to risk that. Until NZ embraces a return to normal life and “living with Covid” instead of constant fear mongering about more shutdowns (we currently have schools being shutdown and moving back to online learning and the health system is closed to all but covid/flu and emergency patients) immigrants would be well advised to look for better places to work. Mandates are another problem with NZ, with countries like the UK and US and most of the EU not requiring them.

      • Hugh PavletichMEMBER

        Kiwikaryn … Note what Peter had to say in a recent post about the NZ public hospital system. Just all part of a severely dysfunctional public service culture Oliver Hartwich of the NZ Initiative touched on within a recent Opinion for The Australian as well …
        .
        .
        Even mediocre would be easier to bear; How NZ lost its mojo … Oliver Hartwich … The NZ Initiative

        https://www.nzinitiative.org.nz/reports-and-media/opinion/even-mediocre-would-be-easier-to-bear-how-nz-lost-its-mojo/
        .
        .
        https://www.macrobusiness.com.au/2022/07/ardern-looks-on-helplessly-as-new-zealand-hurtles-toward-recession/#comment-4296175

        PeterMEMBER
        July 4, 2022 at 10:54 pm
        Spoke with my elderly mother on the weekend. She had a friend who was admitted to Palmerston North hospital recently for some minor elderly ailment. And she caught COVID in hospital. Was transferred to the COVID ward and recounted to Mum how awful the experience was. Room was “freezing cold”, the nurses barely bothered to show their faces. Food came in oven heated paper bags, and was “disgusting”, and wasn’t cleared up for hours. From what I can tell, older Kiwis are developing a fear of hospitals, and they’re falling apart at the seems.

        One clear sign of how bad things are in NZ is when the PM spends all their time offshore. Jacinda is behaving true to electoral form.

        • drsmithyMEMBER

          Neoliberal cheerleader complains about the consequences of neoliberalism.

          Irony staggers towards its deathbed.