Housing Market: House Hunters ‘In Hibernation’ Until Conditions Improve
The chill of the frosty economic conditions has permeated New Zealand’s housing market, leading to a nationwide retreat in home values amid the winter season. An analysis stemming from the latest QV House Price Index highlights a general downtrend, where the average home value dropped by 0.9% over the June quarter of 2024, settling at an average of $916,285. Despite this quarterly decrease, there’s a 2.8% year-on-year increase in home values, though they remain 13.9% below the late 2021 peak.
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The largest declines were observed in Auckland, where average home values fell by 2.6% this quarter, marking the city’s fifth consecutive month of negative growth. Other areas experiencing notable decreases include Tauranga, Palmerston North, and Wellington. Conversely, Marlborough stood out as the lone urban area to see home value growth, albeit modest, this quarter.
James Wilson, QV’s operations manager, remarked on the sustained value of homes in the South Island, especially Invercargill and Dunedin, despite the rising tide of reductions elsewhere. “The tough economic landscape has significantly hindered prospective home buyers, who find themselves battling against high interest rates and inflating prices, thus opting to ‘hibernate’ until the market presents more favorable conditions,” he explained.
Investors, owner-occupiers, and first-home buyers, despite being the most active segment, have all reined in their market participation as the year progressed. An abundance of listings further cooled the market, curbing competition and flattening growth across many regions of the country.
Wilson also touched on the challenges sellers face, including the need for patience and re-adjustment of price expectations in a market that has increasingly favored buyers, yet remains markedly quiet.
With no immediate signs of an uplift, the market is anticipated to continue its softening through the winter, especially in light of recent regulatory changes like the shortening of the bright-line test and the introduction of debt-to-income restrictions. Despite this, the high-interest rate milieu maintains a tightening grip on market dynamics.
Regional Highlights
Northland saw a mixed bag of results, with Kaipara recording a slight increase in home value, whereas other areas like Far North and Whangarei experienced declines.
In Auckland, the decline trend continued, with areas such as Manukau and Rodney leading the reductions. Local insights suggest a flat market with mixed feedback from real estate agents on sales activities.
Tauranga and Waikato echoed the national trend of declining home values, though a few areas like Thames-Coromandel and Taupo saw modest increases.
Taranaki, Hawke’s Bay, and Palmerston North reported decreases, with varying impacts across different market segments. Notable was the performance in Napier and Hastings, where home values saw slight increases.
Wellington‘s market showed continued decreases, pushing it further into a buyers’ market, where the abundance of listings and cautious buyer sentiment prevailed.
The Nelson and West Coast markets felt the winter chill with decreases in home values, though Grey District in the West Coast bucked the trend with a small increase.
In Canterbury and Otago, modest growth was observed in some areas, but the overall slowdown was evident, especially in places like Christchurch and Queenstown, where growth has nearly stagnated.
Invercargill stood out with a slight increase in home values, surpassing performance in most main centers and reflecting steady demand among first-home buyers and a tentative return of investors.
As New Zealand braces through the winter months, the housing market reflects the broader economic challenges at play. With buyers and sellers navigating an increasingly complex landscape, only time will reveal the true extent of these market adjustments.
