August has proven to be a shocker for New Zealand’s housing market, with prices continuing to tumble and supply swelling in response to the Reserve Bank’s aggressive interest rate hikes.
First, QV’s house price index plunged 5.5% over the quarter – an acceleration from the 4.9% decrease in quarterly values reported in July. Every major area reported heavy losses, with the exception of Queenstown Lakes District.
Second, the REINZ House Price Index reported a 1.3% decline over the month of August and a 4.7% fall over the quarter. The six month decline in median prices (-9.6%) was also the sharpest in records dating back to 1992.
Third, CoreLogic’s Mapping the Market tool showed that home values fell across 84% of New Zealand suburbs in the three months to August. This was led by Auckland, where 97% of suburbs recorded falling values.
Last week, the TradeMe property index was released, which showed that New Zealand house prices fell by 1.2% in August, with values down 6.2% year-on-year:
The decline in house prices came at the same time as the number of properties for sale across New Zealand soared 76% year-on-year, according to TradeMe.
Commenting on the result, Trade Me Property Sales Director Gavin Lloyd noted that listings “have been on an upward trajectory all year and currently supply is well above pre-pandemic levels. Last month marked the third month in a row where we saw listing numbers spike by more than 50 per cent year-on-year”.
The decline in New Zealand house prices has arisen on the back of a collapse in mortgage demand in response to the Reserve Bank’s aggressive rate hikes. As illustrated in the next chart, new mortgage commitments plummeted 30% in the year to August, a sharp turnaround from the explosive 128% growth recorded a year prior:
From boom to bust.
With listings swelling and the Reserve Bank certain to continue hiking rates, New Zealand house prices will continue to fall.
After experiencing one of the world’s greatest booms over the pandemic, New Zealand house prices are now poised to record one of the greatest busts.
