Average housing values declined for the second month in a row in June, according to the latest valuation data from Quotable Value (QV).
This country's average dwelling value was $916,285 at the end of June, according to the QV House Price Index (HPI), down by $10,487 since the end of April.
The biggest drops have been in the Auckland region, where the average value was $1,250,372 at the end of June, down by $31,624 since the end of April.
Not only are values declining, the rate at which they declining is increasing.
According to QV's HPI, the average NZ dwelling value declined by just -0.2% in the three months to May, but that slide increased to -0.9% in the three months to June.
In the Auckland region the drop in values increased from -1.4% to -2.8% over the same period.
Other regions with average value declines greater than 1% in the three months to June were Tauranga and Palmerston North, both -1.3%, and Wellington region -1.2% (see the chart below for the full regional figures).
"Frosty economic conditions continue to impede New Zealand Aotearoa's now ice cold housing market, causing home values to dip with the temperatures in most main centres," QV said in its HPI report.
QV Operations manager James Wilson said there were still some pockets of modest value growth, mostly in the South Island, but even these were starting to wane.
"Even Christchurch and Queenstown, two of our more bullish housing markets in recent years, [are] now experiencing little or no growth whatsoever," he said.
"Tough economic conditions are continuing to make it extremely difficult for potential purchasers to save a sizeable deposit for a home, secure finance from the bank, and service a mortgage with interest rates currently sitting around 7% and onshore inflation still biting.
"Many house hunters are in hibernation now until conditions improve, potentially on the other side of winter, maybe longer.
"As a result, downward price pressure has spread across all segments of the market now, with investors, owner-occupiers and even first home buyers, still the most active group in the market today, all taking a noticeable step back as we pass the halfway point of the year," Wilson said.
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34 Comments
It's fascinating to be living through the biggest (dollar value) housing crash in NZ history. It shows that loads of people willingly ignore the writing on the wall.
The massive gains and stupid auction results "news" puff pieces are being replaced with mortgagee sales as the new lead news stories.
I always assumed that during a crash everyone would be aware of it and act accordingly. No so.
The bulk of people are still unaware or non believers. Recall those days when the bbq crowd would crow about their rental and everyone seemed to be in, boots and all? It was the same with shares - all those share groups at work....and then pop!
Until the 'bbq' chatter goes mainstream the big drops still lie ahead. The race for the door has not yet begun. This is what the smart money is waiting for.
The NZ Housing market crash speeds up on its run South.
This sucker is going down.
Buyers should offer only the previous 2012- 2015 price range or walk.
We already see some recent sales, at around 2018 prices.
This market is but Mid-crash.
Negative equity should not be your future.
Don't be the Bankers and Overprced Vendors, Useful Idiot.
Massive discount or walk.
There is stock galore.
If you look at wage-adjusted house prices and a rough mortgage affordability index (wage adjusted house price index x interest rate), it is pretty clear that we are going to continue to see an adjustment. Here's a simple graph to illustrate.
So which of the following three variables moves to get us back to historic trend, and by how much does each move?
- House prices
- Interest rates
- Wages (ability to service debt)
For example, could we see wages up 5%, house prices down 20% and OCR down to 3%. Or will RBNZ crashing rates in late 2024 do all the work?
Yes, in the loony tunes period pre-GFC, the overnight cash rate rose from 5% to 8% (pushing mortgage costs up) but house prices still continued to rise. Households, landlords and businesses kept on leveraging - pushing private debt levels up from 110% of GDP in 2004 to 160% in 2009. This position was completely unsustainable - interest payments on private debt hit about 15% of GDP. The economy collapsed. Note that private debt levels have stayed around 150% of GDP since.
My point is that the collapse in 2009 put mortgage costs relative to wages back in the same range they had been pre-2004 (the green shaded area on the graph). House prices didn't really collapse relative to wages though, it was a crash in interest rates that did the adjusting. From 2009 to 2020 mortgage costs relative to wages were pretty steady - with interest rates edging lower over that period (enabling house prices relative to wages to go up). Then in 2020, RBNZ dropped interest rates and reduced mortgage costs to unprecedented low levels. House prices responded immediately - reaching for the sky.
Then in 2022, when rates were hiked aggressively, mortgage costs broke above the trend and everything started to get wobbly. House prices relative to wages reduced sharply. The question now is will we see mortgage costs back in normal ranges as a result of a collapse in (a) house prices or (b) interest rates - or some combo of the two?
I do not see wages going up much next few years, see OCR falling but not to 3%, so most of the movement will be house prices.
Re the OCR, if the first move is a surprise it will likely be only 25bps, if well signaled could be 50. Your 3% would require 10 x 25bps cuts, although likely their would be a few 50s early on.
Food prices globally are not going to fall, there is too many concerns about food security, I think its going to be to be tough to keep CPI inside 3%.
I see no relief until budget 2025, I am glad NACT cut things here, as anything inflationary would have been real bad, but by 25 we are going to need some vision and targeted spend to get things moving.
Global food prices are interesting - they are 20% above the steady level we had between 2015 and 2021 having spiked in 2022/23. However, global food index is back at 2010 to 2014 prices. Just one of the many reminders that our quality of living increases between 2009 and 2021 were built on cheap imported energy, offshore improvements in productivity, and bank credit flowing into our economy at around 8% of GDP per year (net).
I see no relief until budget 2025, I am glad NACT cut things here, as anything inflationary would have been real bad, but by 25 we are going to need some vision and targeted spend to get things moving.
National will spend more than they are letting on, and they know it. If jfoe is right in the numbers above, that's what it would take to get private debt growth to start pumping again. If that's not happening until mid to late 2025, then there is a whole lot of juice leaking out of the economy which needs to be plugged by something, and that something is a fiscal deficit, and it will continue.
Significant wage growth will cause price inflation which will prevent a rates drop so 2 and 3 are mutually exclusive and I’d pick neither.
Price drops, although I’d love them, are going to be severely impacted by replacement cost which is just horrendous. So much of a build is labour rates are that is still coming through
We really are in a pickle.
My guess is a that with reduced employment a lot of people leave and then house prices can drop without the replacement value support. This would be over the next 3 to 5 years.
Visited Auckland weekend just gone ... very over populated ... quality of life seems fake too me... parks and reserves well beaten and battered ...car parking at premium rates... streets clogged with vehicles...high density builds wont look so grand when time takes its toll.... certainly is the big smoke ....saw homeless living in cardboard down viaduct,beggars at bottom of bullock track and at mcdonalds drive thrus...your smashing it Auckland....lol
Awkland is bursting. It cannot take another million. The infrastructure is simply not there and what is, is groaning under the load of the last half million arriving. Schools, health care, transport, housing, all massively under spec for current loads.
And we haven't even talked about the lack of electoral mandate to have the last million arrive, let alone more.
Just stop it.
This example is a classic. Had a price on it yesterday of $4.5m which is what they paid for it in 2021.
https://homes.co.nz/address/auckland/ponsonby/13-tole-street/pNxAa
House prices are way to high compared to average wages, the crash will continue especially in Auckland where you need four people on average wage and a large deposit to be able to purchase a average house. This is after the already 20% crash form highs every day more people go deeper into negative equity
https://www.oneroof.co.nz/news/revealed-the-surprising-odds-of-homeowne…
Even this article about the possibility of house prices drops undercooks the risk. It looks like they have used nominal prices and they are saying that if the house prices goes up $1 in nominal terms over 10 years it has increased in value ... Spruikers gotta spruik.
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