Property market signs off 2023 on a strong note

After October's 0.4% increase and the 0.7% gain in November, December saw a rise in property values of 1.0%. This is the strongest monthly gain since January 2022 (2.1%). The average value now stands at $924,489, up 2.1% over the past three months since September's cyclical trough.

However, national property values remain 3.3% below this time last year, and 11.4% lower than the peak from two years ago.

The gains were widespread across the main centres in December, with Tauranga, Auckland, and Christchurch all registering increases of more than 1%.

CoreLogic NZ Chief Property Economist, Kelvin Davidson, said while the continued gains in property values in December weren't a surprise, he's also anticipating a degree of continued 'patchiness' in 2024, both in terms of the changes from month-to-month, as well as variability across the regional markets.

"A further rise in property values in December seemed almost inevitable given housing market sentiment has risen in recent months. This is off the back of several factors including the change of government, a peak - and even some falls - in mortgage rates, continued growth in employment, and soaring net migration," Mr Davidson said.

"However, I doubt that too many people are rushing out and buying property just because the recent downturn has suddenly made it look cheap. In fact, affordability pressures are still a major issue. Even though mortgage rates have dropped a bit for some durations, the most popular shorter fixed terms, such as one year, have been flatter at a high level. This is continuing to strain aspiring homeowners' ability to buy property.

"And of course, caps on debt to income ratios remain on the cards within the next year, too. Sharper or more widespread falls in mortgage rates than the Reserve Bank would be comfortable with could perhaps bring forward the timing for those DTI restrictions, provided the banking processes are in place," Mr Davidson noted.

"As such, although the general upwards trend for property prices is likely to continue in 2024, it may not be smooth from month-to-month, with some results stronger, but others much weaker. Underlying that patchy national picture would be variability at the regional level too, with the main centres potentially seeing the biggest boost from inwards migration, but provincial markets less supported."

CoreLogic House Price Index

National and Main Centres

Main Centre Average Value

Auckland

Within Auckland, Manukau recorded the strongest rise in property values in December, up by 2.1%, although modest falls prior to that meant that the quarterly increase was 'only' 1.6%. North Shore, Waitakere, and Auckland City were also fairly robust, while Rodney and Papakura were relatively flat, and Franklin recorded a fall of 0.9% in December, and 0.8% over the past three months.

“Auckland's sub-markets are all starting to look more robust, apart from a bit of lingering weakness in Franklin. This serves as a reminder that the upturn in 2024 might not all be one-way traffic, with some inconsistency from month-to-month and across regions," Mr Davidson said.

"However, with housing sentiment shifting to the upside and mortgage rates at least not going any higher, it seems likely that Franklin could return to the pack shortly too."

Wellington

Wellington's sub-markets generally saw further growth in December, especially in Lower Hutt, with a gain of 2.6%. That market is now 4.5% higher since September, trumped only by Porirua, at 4.9% quarterly growth taking its annual change to 1.1%.

"Following large declines through the downturn, the wider Wellington market is now turning around fairly quickly, however all parts of Wellington remain quite a bit lower than their previous peaks," Mr Davidson said.

"That said, Wellington City itself remains a little lacklustre with a modest fall in values in December. Of course, with an average value greater than $1 million, affordability will still be a key issue for some buyers in Wellington City."

Regional House Price Index results

The expectation that 2024's property market upturn could be variable is reinforced by the provincial value results for December. For example, Gisborne showed a 2.5% monthly fall despite a 0.4% rise since September, with Napier also down in December. By contrast, Whanganui, Rotorua, and Queenstown all rose by 2% or more.

Mr Davidson noted that Queenstown still stands out as an area that has generally defied the downturn, with values now almost 6% higher than a year ago, and sitting at a new peak of around $1.77 million.

"Clearly, Queenstown is a still a magnet for wealthy buyers, whether local or from out of town. And strong demand to live and work in the area as tourism snaps back is seemingly contributing to price pressures as well," he said.

Other Main Urban Areas (ordered by annual growth)

Property market outlook

Mr Davidson notes that with 2023 behind us, it's time to assess the prospects for the housing market in 2024.

"December brought 2023 to a close on a strong note for property values, but I suspect that the likely recovery over the year ahead could undershoot some expectations, and prove to be a little underwhelming by past upswings. A lot hinges on how mortgage rates move but also how any falls are counteracted by tighter lending restrictions from the Reserve Bank, such as DTIs," Mr Davidson said.

"It's always worth being mindful of the role of psychology in the housing market, and the scope for sentiment to overtake the fundamentals. Certainly, investors' moods seem to have perked up lately off the back of the change of government. But with significant cashflow top-ups out of other income still required on a typical investment property purchase, that positive mood may not translate into much extra buying.

"Taking all of this into consideration, I anticipate sales activity to rise by about 10% this year, which is reasonable growth, but from a low base. Meanwhile, national property values could rise by about 5%, averaging out a wider range of regional results."

Download the CoreLogic House Price Index

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