The Real Estate Institute of New Zealand (REINZ) has released its October results, which showed that only 4892 residential sales were recorded throughout the nation in October, which was down 35% compared to October last year and down 31% compared to October 2019 before the Covid pandemic disrupted the market.
Perhaps even more significant was the fact that sales fell in October compared to September (-4.3%). This is unusual given sales generally rise strongly in October:
Commenting on the sales result, REINZ CEO Jen Baird noted that “adjusting for seasonality, we note sales are down 9.5% — October performed poorer than expected compared to September”. This reflects “buyers and vendors acting with caution, weighing up their options”.
However, despite the collapse in sales, REINZ’s House Price Index (HPI), which adjusts for differences in the mix of properties sold each month and is regarded as the most reliable indicator of house price movements, actually rose 0.2% in October:
The HPI is down 10.9% compared to October last year and down 12.4% compared to its November 2021 peak.
Jen Baird explained that “several compounding factors have created uncertainty and hesitancy in the market where there was confidence and urgency last year — rising interest rates and the cost of living, tax legislation and property regulation, tightened lending criteria, and global events with macro-economic impacts”.
However, while “we see downward pressure on prices, and the pace of the market has come down” Baird noted that “over the last couple of months, salespeople have observed an increase in enquiries and a noticeable increase in the number of first home buyers back in the market”.
Personally, I view this price rebound as a ‘dead cat bounce’ given the Reserve Bank is expected to hike interest rates aggressively over coming months to tame stubbornly high inflation.
As long as the Reserve Bank continues to lift interest rates, New Zealand house prices will fall.
