Bad start to spring sales

The housing market failed to thaw in the first month of spring.

Wednesday, October 12th 2022, 11:05AM

by Sally Lindsay

While REINZ data show the median property price increased slightly nationally, sales are down and properties are staying on the market longer with median days to sell high and inventory levels elevated.

Sales were down 10.9% compared to the same month last year - the lowest number of sales in September for 12 years. Just 4,943 properties were sold.

However, annual sales comparisons in September are distorted by last year’s delta lockdown. Delta temporarily held back activity, largely in the Auckland region.

Data on house prices and median number of days to sell were more telling of the mood of the market, says Jeremy Couchman, Kiwibank senior economist.

The REINZ house price index (HPI) posted its 10th consecutive monthly fall and house prices are 8.1% lower on a year ago – the biggest annual decline since the GFC in 2009.

The median number of days to sell a property held steady at 49 days (seasonally adjusted), still about 10 days above the REINZ average and indicative of further house price falls ahead.

House prices are now down 12.6% from their peak in November. In Auckland the HPI dropped 1.3% last month and is now down 17.3% from its peak. In Wellington, the HPI is down 19.8% from its peak and Canterbury is down 7% from its peak.

Slow rises

During last month median prices for residential property increased 2% annually, from $795,000 in September last year to $811,000 this year. Month-on- month, this is a 1.4% increase from $800,000 in August.

The median residential property price for New Zealand excluding Auckland dropped 0.7% — from $720,000 to $715,000. There was a month-on-month increase of 2.1% from $700,000 in August.

The West Coast had the biggest annual increase in the median price – up 30.9% to $360,000.

Auckland’s median price dipped 8.3% compared to September last year, down from $1,140,000 to $1,045,000. Six of the region’s seven legacy territorial authorities had negative annual median price movements: North Shore had the greatest drop down 28.6%, followed by Papakura, down 16.9%.

There was a marked increase in the percentage of North Shore properties sold for under $1 million compared to the same time last year, contributing to the drop in median price.

In Wellington, the median price was down 3.5% annually, from $850,000 to $820,000 last month. Seven of the eight territorial authorities had negative annual median price movements: South Wairarapa had the biggest drop, down 27.5%, followed by Upper Hutt down 14.5%.

REINZ chief executive Jen Baird says while first home buyers are being enticed back into the market by easing prices and less competition, most properties are still unaffordable to many, particularly in larger hubs, such as Auckland and Wellington.

“Investors remain largely absent — new tax legislation and rising interest rates have created concern amongst this buyer pool, seeing them step back.

“Overall, buyers remain cautious. Increasing interest rates, tighter lending criteria, and concerns around the cost of living continue to challenge the pace of the market. In light of last week’s OCR increase of 50 basis points, bringing it to 3.5%, with further increases expected, we expect sentiment to remain cautious — despite a strong labour market.”

Couchman says Kiwibank continues to forecast a 13% trough by year end before a modest recovery. “However, risks are skewed toward a deeper trough in prices if the RBNZ follows through with its bold talk of 75bp OCR hikes. Most outstanding mortgages roll onto much higher rates in the next six months, meaning the fizzer of a start to spring may very well drag into summer – typically the busy period for housing activity.

Regional differences

While the mood in the housing market appears universally downbeat, the data does show differing experiences in housing markets across the country. When it comes to the largest centres, there is a clear north/south split, says Couchman.

The North Island has experienced the biggest slide in prices to date. Wellington, for instance, leads the country with the largest house price falls in 2022. House prices are 17% down on a year ago in the capital and the median days to sell a property are tracking a whole 24 days above the REINZ average. “The only bright spot is an almost 6% rise in Wellington’s median house price to $820,000.”

Auckland is also experiencing double digit annual house price falls at -11.2%.

In Canterbury, sales activity has certainly cooled. However, the annual house price movement has only just ticked into negative territory (-0.1%). “In another sign the Canterbury market has more buyer interest than other parts of the country, the median number of days to sell at 37 is only a smidgin above the region’s long-term average,” says Couchman. Canterbury did not experience the excessive degree of exuberance seen in 2021 as in other parts of the country. In Otago, the HPI is largely flat, and was only 1.5% lower than last September.

Tags: house prices housing market