The real estate market slowdown offers a glimmer of hope to struggling first home buyers but OECD data shows New Zealand homes are still among the least affordable in the developed world. Photo / Ted Baghurst
The Far North and Kaipara bucked a national trend with average house prices increasing in 2022 while prices in the big cities continue to tumble.
However, in recent months the real estate slowdown appears to
have reached even the furthest corners of Northland with Far North house prices starting to slide in the last three months of the year.
The latest CoreLogic NZ House Price Index report paints a picture of two New Zealands.
In general it shows house prices fell, in some cases dramatically, in the main centres during 2022 but the rate of decline slowed in the final quarter.
In many of the regions, however, prices continued to climb overall during 2022 but that was reversed in the final quarter as average prices started to fall or at best showed slim increases.
In the Far North the average house price rose by 5.9 per cent during the year just ended. In the last three months of 2022, however, the average price dropped back by 2 per cent to finish just under $700,000.
In Kaipara — where the market has been driven by the Mangawhai property boom — the average price hit $884,000 by the year’s end, with a 2.5 per cent increase overall and 0.3 per cent in the final quarter.
In Whangārei the average house price fell by 1.5 per cent to just under $800,000 with the decline slowing to 0.2 per cent in the last three months.
Overall New Zealand house prices fell by 5 per cent in 2022 with the biggest falls in the Wellington area, where the average price plummeted by 16.9 per cent. In Upper Hutt more than a fifth was shaved off house prices.
However, those declines come on the back of skyrocketing property prices in previous years, especially during the Covid pandemic.
The average house price in New Zealand increased by a whopping 41 per cent between the last market trough in August 2020 and the peak in March 2022.
Vendors hoping to sell their properties this year will rue the slowing market but it offers a small glimmer of hope to Northlanders struggling to buy a home.
Even with last year’s decline, however, New Zealand homes remain among the least affordable relative to income in the developed world, according to OECD figures.
CoreLogic NZ head of research Nick Goodall said last year’s house price decline was a significant turnaround after the market’s 27.6 per cent growth in 2021.
It was also the biggest annual decline since the 6.4 per cent drop recorded in June 2009, when the market was still in retreat from the Global Financial Crisis.
Throughout much of 2022, the rate of decline accelerated as the official cash rate climbed higher and affordability constraints kicked in.
The last quarter offered some light at the end of the tunnel as worries about further interest rate increases diminished, though Goodall described that as a “false dawn”.
Persistently high inflation in the third quarter led the Reserve Bank to forecast a higher peak in the official cash rate (OCR) — which influences the interest home buyers have to pay on their mortgages — along with increased economic uncertainty and potentially a recession.
“We don’t expect this to signal the bottom of the downturn by any means, particularly given the outlook for further rate increases in the first half of this year. This will restrict borrowing capacity and until rates stabilise we should be prepared to see further declines in value this year.”
The future for the property market after the expected 5.5 per cent peak of the OCR in April/May, and the hopeful taming of inflation, rested on the economic health of the country, Goodall said.
If a recession hit, but it was minor and with limited job losses, interest rates could plateau.
If the economy was hit worse than expected, interest rates could start to fall as the Reserve Bank saw a need to stimulate activity.
Christmas retail figures hinted that consumers were starting to reign in spending, which would be encouraging for the Reserve Bank and its inflation outlook, Goodall said.
Kerikeri-based mortgage adviser Sarah Curtis said she had seen a marked change in the Far North property market in the past three to six months.
The clients she was getting now were more committed and the market had shifted in their favour.
“They know what the interest rates are, they know what the repayments will be, they have a budget and a goal. They’re also having more success because of the way the property market is. There aren’t as many auctions now. A lot of it is negotiations. That has given a little bit of power back to buyers,” she said.
“Now they can say, ‘This is what I’m willing to pay for the property’, whereas before they’d go to an auction with multiple people fighting it out, and it may have driven the price higher than the house was actually worth.”
Another change was that the FOMO (“fear of missing out”) that had driven many sales during the pandemic, along with low-interest rates, had disappeared.
The problem now, especially in Kerikeri, was that the first home bracket was around $750,000.
People living in those homes couldn’t afford to move into the next bracket up so they were renovating instead, pushing their homes into the $900,000 bracket. There was a serious shortage of new builds at first-home buyer level.
As a result, buyers were being pushed out to places like Ōkaihau, Ōhaeawai and Kawakawa, where prices had also gone up “massively”.