No sign of property prices going up: What is happening with the NZ housing market this week?

Analysis – Households with mortgages can expect at least six more months without talk of interest rate cuts, as a subdued housing market refuses to spring back. Here’s what moved real estate this week.

Households can expect at least another six months of being [https://www.rnz.co.nz/news/business/519323/households-struggling-to-save-or-cope-with-unexpected-bills-report squeezed by high interest rates and poor economic conditions.

A Kiwibank survey showed nearly one in three respondents could not cover a $500 unexpected bill without borrowing, selling something or using a credit card. People were also struggling to save and budget.

Kiwibank chief executive Steve Jurkovich said he saw no relief in sight for stressed and stretched households.

“I don’t see us at the end yet, I see it closer to the end than the start.

“We have at least the end of 2024 and probably into 2025 before we see any meaningful interest rate cuts.

“When you look at inflation … and some of the costs that are pretty stubborn, we’ve got a pretty tough time and headwind ahead of us for the next six months at least.”

House prices are falling

CoreLogic chief property economist Kelvin Davidson said high interest rates and a weaker labour market were putting the brakes on the market.

House values continue to fall with some main centres seeing an increase in the rate of decline.

The latest QV House Price Index shows home values fell by a national average of 0.2 percent over the three months to the end of May.

The average house value sits at $923,713, which is up 3.9 percent on the year earlier.

Auckland led the market down with a 1.4 percent drop in quarterly values for the fourth month in a row.

QV operations manager James Wilson said the market would remain under pressure as long as interest rates remained high.

“The housing market has largely stalled, and now the seasonal slowdown is well and truly upon us, with both buyers and sellers continuing to grapple with difficult economic conditions,” Wilson said.

“So those who are in a position to buy right now, have the upper hand. Purchasers are spoilt for choice and appear to have time on their side, with nothing to suggest that house prices are going to take off again soon.”

Similarly, CoreLogic’s quarterly dissection of suburban prices showed 221 suburbs of the 938 analysed had a drop of at least 1 percent for the June quarter, with 10 falling by 5 percent or more.

Prices were falling in a number of places – spread across affluent and cheaper areas.

Tax cuts, and lending rule changes – looser LVR (loan to value ratios) and the introduction of DTI (debt to income) limits – were unlikely to shift the “subdued” housing market this year, Davidson said.

Suburban prices in Auckland, Hamilton, Tauranga, and Wellington were showing the biggest slowdowns, while Christchurch and Dunedin were less pronounced.

And just as tax cuts take effect on 1 July, homeowners around the country are bracing for some of the biggest rates hikes yet.

At the top of the list are West Coast Regional Council with a proposed rise of 27 percent and Hastings District Council at 25 percent. Wellingtonians are looking at about 17 percent, while 16.5 percent is proposed for Hamilton.

Auckland households face a modest rise of about 6.8 percent. These numbers may change as councils finalise long-term plans.

Losing equity

New housing data shows thousands of first-home buyers are losing equity – their properties are worth less than what they paid for them.

More than 8500 first homes bought between October 2021 and March 2022 had dropped in value, CoreLogic figures showed

More than 2000 have dropped by more than 20 percent, suggesting any equity homeowners had in the deal would probably have been wiped out.

Of those that are worth less than they were purchased for, 42 percent are in Auckland, and 10.8 percent in Wellington.

However, CoreLogic head of research Nick Goodall said it should not be a problem for buyers to have lost money on their homes unless there was a change in their circumstances.

Most people would have bought with the intention to hold for a longer-term, he said.

But while prices had lifted off the bottom, the momentum seen building in the housing market during the latter part of 2023 had petered away, Goodall said.

Building cost inflation

Changes making it simpler and cheaper to build, and easier to import products are unlikely to have much impact on construction costs in the short term.

The average cost of building a standard three-bedroom house in the main centres grew at an annual rate of 1.8 percent, back to pre-pandemic levels, according to the latest QV CostBuilder report. That’s still its lowest level in more than four years.

The annual rate to the end of December last year was 4.9 percent and hit a high of nearly 21 percent in 2022.

It showed some material prices falling, and a slowing housing market forcing builders to cut margins.

QV CostBuilder spokesperson Simon Petersen said new house builders would need to wait a little longer.

“Long-term we suspect it will have a material effect on construction costs.

“It will take time to implement these changes, nothing moves fast in government. It’s certainly calls for optimism.”