Report notes changes in average household mortgages
The property market experienced a gentle deceleration in momentum three months after the government announced its housing reforms, according to the latest CoreLogic House Price Index (HPI).
The data found that nationwide values increased by 1.8% in June, a slight reduction on the 2.2% growth rate in May.
CoreLogic head of research Nick Goodall said the growth rate in June slowed in 12 of the 18 largest markets in New Zealand, with a further three recording a drop in values over the month. For example, prices in Gisborne recorded a -0.9% drop in value last month compared to a 35% increase in the past 12 months.
“The exceptional growth displayed during the past year was not sustainable, particularly with increased deposit requirements, market uncertainty driven by government regulation and the prospect of higher interest rates. The turnaround should perhaps not be too much of a surprise, though the timing of it certainly is,” Goodall said.
New Plymouth (-0.3%) and Napier (-0.1%) also saw minor drops in property values last month. However, in both cases, the strength of recent growth means the quarterly rates still exceed 7%.
Read more: CoreLogic releases update on New Zealand housing market
Meanwhile, Nelson and Invercargill saw increases in their monthly growth rate at 2.1% and 1.6%, respectively – showing that not all markets have lost momentum.
In Palmerston North, a further 3% growth last month took the annual growth rate to 38.6% and an over $700,000 average property value for the first time. Nationally, average property values increased by 22.8% for the 12 months to June.
The continued growth in the market, albeit at a slower rate, has taken the average property value across the country above $900,000 for the first time. Meanwhile, the total value of all residential property in NZ has now streaked past the $1.5 trillion mark for the first time, according to CoreLogic.
“These milestones will not necessarily be welcomed by all, especially hopeful first-home buyers. However, the tentative signs of change may provide some hope for would-be home buyers as well as the government, who are under pressure to tilt the market in favour of new market entrants,” Goodall said.
“On that note, the recent agreement to add debt-to-income (DTI) controls to the Reserve Bank’s macro-prudential toolkit adds another element of uncertainty for the market. This is particularly true for investors, for whom any restrictions will likely be tighter, further limiting their activity in the market.”
CoreLogic also noted that average New Zealand household mortgages reached record levels, and a slight increase in mortgage rates could have a significant impact.
“While our bank valuation activity confirms demand for residential property has and will continue to reduce, persistent low levels of new listings are likely to limit any significant drops in value,” Goodall said.
“If the recent signs of weakness persist throughout the rest of the year, however, alongside what would be a seasonal uplift in spring listings, we may finally start to see the imbalance of demand consistently outstripping supply addressed.”
