Property values in Aotearoa New Zealand fell 0.4% in November, marking the ninth consecutive decline, according to CoreLogic's hedonic Home Value Index (HVI).
Values now stand at $800,795, which is 3.5% lower than a year ago, equivalent to a drop of around $29,100. They’re also still 17.7% below the post-COVID peak, although 16.0% higher than the pre-COVID figure from March 2020.
Around the main centres, the results remained a bit patchy in November, with Te Whanganui-a-Tara Wellington dropping by 1.0%, Kirikiriroa Hamilton 0.5%, and Tāmaki Makaurau Auckland 0.4%. However, Tauranga was flat, with Ōtautahi Christchurch edging up by 0.1%, and Ōtepoti Dunedin rising by 0.4%.
Home Value Index
National and Main Centres
CoreLogic NZ Chief Property Economist, Kelvin Davidson said that November’s results indicate a market that’s still in a ‘holding pattern’; not falling to any significant extent, but not rising emphatically either. That’s consistent with patterns in the underlying drivers – some supportive, some still restrictive.
“The rate of decline in property values across the country has slowed lately, from an average of 0.8% per month from April to August, back down to an average of 0.3% falls over September to November. That might signal a floor for values is getting closer.”
“Certainly, mortgage rates have fallen further lately, and this pattern looks set to continue into 2025, with the Reserve Bank indicating that the official cash rate will likely be cut again on 19th February, and potentially by another 'front loaded' 0.5%.“
"But not only are market rates falling, the pass-through to existing borrowers’ actual repayments will also be brisk, given that around 10% of mortgages are floating and another 40% are set to roll onto a new fixed rate within six months.”
As we’ve seen many times before, the ability of lower mortgage rates to kickstart housing market sentiment and sales transactions, as well as property values, shouldn’t be underestimated. But it’s also important to note that there are several factors pushing in the other direction at present, such as the overhang of available listings and the weak labour market.”
“Although the recent downturn in property values may come to an end soon, it won’t necessarily give way to a sharp or sudden upturn. The Reserve Bank itself is projecting a rise in house prices of around 7% in 2025, and I’d broadly agree with that view. If correct, it’d be a fairly modest rise given how deep the downturn since late 2021 has proven to be.”
Tāmaki Makaurau Auckland
Most of Tamaki Makaurau Auckland’s sub-markets saw falls in property values in November, ranging from a modest decline of 0.2% in Waitakere up to drops of 0.6% in both Auckland City and Rodney, and 0.8% in Franklin. However, Papakura managed to hold steady in November, and North Shore actually rose by 0.3%.
That said, values in each of the sub-markets remain at least 3-4% lower than a year ago, with some having only increased by less than 10% from their pre-COVID marks. In fact, Auckland City has only risen by 3.4% since March 2020, and Waitakere by 5.6%.
Mr Davidson notes, “abundant supply still seems to be a significant restraint on property values in Auckland, both in terms of existing properties listed for sale, but also the flow of new-build stock being completed. However, first home buyers remain fairly active, and it’ll be interesting to see if the emerging return of mortgaged investors leads to some upwards pressure on Auckland’s values in 2025.”
Te Whanganui-a-Tara Wellington
The wider Te Whanganui-a-Tara Wellington area underperformed in November. Porirua and Lower Hutt both saw values fall by 0.6%, Upper Hutt by 0.9%, and Wellington City dropped 1.2%. That said, Kapiti Coast was a little more resilient, with a minor 0.2% drop.
Wellington City itself is certainly an interesting market at present, with values down by nearly 7% from a year ago, and around 9% from the mini-peak earlier in the year. It’s also only seen a 3.1% rise in property values from the pre-COVID mark in March 2020.
"Wellington looks to be a good example of where job insecurity is outweighing the benefits to sentiment and households’ finances of lower mortgage rates. This could also make it an interesting test case for property values, in terms of the strength of any recovery in 2025 amidst the backdrop of labour market weakness.”
Regional results
To some extent, the regional trends for property values seemed to flatten out in November, possibly signalling the supportive influence of lower mortgage rates. For example, Nelson rose by 0.3%, with Hastings edging up by 0.2%, and both Palmerston North and Rotorua flat. There were falls in areas such as Napier and New Plymouth, but relatively modest at 0.2%.
“Some provincial markets fared relatively well in November, but that wasn’t universal. Indeed, after a period of resilience, Queenstown dipped by 0.8%, with Gisborne and Whangarei both falling by 0.9%. To be fair, it’s risky to read too much into a single monthly result. But those drops do nevertheless highlight once again the holding pattern the housing market currently seems to be in, with some key factors such as mortgage rates providing support, but others more challenging,” Davidson noted.
Property market outlook
Looking ahead to 2025, Mr Davidson noted underlying drivers such as lower mortgage rates and a return to modest GDP growth should see property sales volumes continue to rise. In turn, that will help to bring down the stock of listings available on the market, and contribute to a rise in property values.
CoreLogic's modelling suggests that after less than 70,000 property sales in both 2022 and 2023, the figure will end up at around 80,000 this calendar year, before rising to approximately 90,000 next year. That's still slightly below average, but will be a welcome return to more normal levels of activity for many market participants.
"But the flipside of easing monetary policy and lower market interest rates is that the banks’ internal serviceability test rates are also falling back towards the 7.5% mark, from as high as 9% earlier in 2024. This is getting a lot closer to the point where we estimate the debt to income ratio rules will become a greater consideration for borrowers.”
“In turn, the tendency for DTIs to restrain borrowers’ capacity to get larger loans – even if they could technically afford it – is another reason for caution about how fast the housing market might rise next year.”
He also suspects some investors will be weighing up conflicting forces when it comes to possible property purchases in 2025. "On one hand, the cashflow position may start to look a lot better, off the back of lower debt servicing costs. But with DTIs in action, it may just get a bit trickier to actually get the loan in the first place”, Mr Davidson concluded.
CoreLogic New Zealand