New Zealand's housing market has reached a clear turning point, as stretched affordability, higher mortgage rates and reduced credit availability cause growth rates to slow, or even turn negative, in many areas of the country.
CoreLogic NZ's interactive Mapping the Market Report, which is updated quarterly and compiled using the country's most comprehensive property data, has begun to show signs of weakness in dozens of suburbs.
Aotearoa's property market proved highly resilient in 2021, maintaining feverish growth levels through COVID, snap lockdowns and border closures. But Mapping the Market's latest release shows 154 suburbs have recorded falls in median values in the three months to February 2022, while 581 posted gains of 1.0% or more for the period.
CoreLogic NZ's Chief Property Economist Kelvin Davidson said this quarter's Mapping the Market had been adjusted to focus on the three-month value change (rather than the previous, slower-moving 12-month change), to give a more current and timely view of what's been happening recently.
He said the altered comparison period neatly encapsulated the state of flux around market impacts from changes to loan to valuation ratios (1 November), credit contracts and consumer finance laws (1 December) and the spread of the Omicron variant.
"The figures are pretty revealing,” he said.
"At the headline level Mapping the Market shows an emerging weakness in parts of Auckland, Hamilton, Napier/Hastings, Wellington (especially Lower Hutt), Kapiti Coast, Dunedin and Queenstown. But conditions remain a bit stronger still in areas such as Tauranga, Christchurch, Rotorua, New Plymouth.
"Interestingly, although it's early days yet, this is broadly in line with what we outlined in our vulnerability research last year, which emphasised the risks that can be evident in certain areas if affordability is too stretched, mortgage repayment problems are emerging, or investors start to sell, for example.”
The latest Mapping the Market report covers 960 suburbs across the country. Figures show of approximately 200 Auckland suburbs about 60 recorded a drop in median value of -2.0% or more in the three months to the end of February.
Prestigious areas of Auckland such as Remuera and Epsom have seen falls of -2.4% and -2.6%, equivalent in dollar terms to $68,100 and $66,200 respectively, and Queenstown's Lake Hayes has also softened -1.9%, or $45,500.
Mr Davidson said a similar weakening had occurred in more expensive suburbs of Hamilton and Wellington too, albeit in those markets price falls are more spread across both upper and lower tiers of property.
"It's important to note the news isn't all downbeat, there are still nine suburbs where prices have increased at least 10% in the past three months and another 90 suburbs have increased between 5% and 10% for the same period,” he said.
"In fact, of the 960 suburbs covered, more than half (581) have still recorded price gains of at least 1% since November.”
Fordlands (Rotorua District) recorded the highest percentage growth in the quarter, up 15.4% to a median value of $457,850 followed closely by Leigh in Auckland, which increased 15.0% for the period to $1,473,850.
Mr Davidson said the quarterly results were best summed up as ‘mixed' and provided a valuable indicator of the housing market's current "plateauing" trend.
"The figures aren't surprising and are exactly what you would expect to see as sentiment begins to turn,” he said.
"Our view is that a soft landing is still more likely than a major downturn, but the market will need to adjust to some economic uncertainty and higher mortgage rates. Buyers and sellers will naturally take some time to agree on where the new market normal lies, which will result in broadly flat housing prices at a national level – but falls in some areas offset by rises elsewhere.”
CoreLogic Mapping the Market Dec 2021 - Feb 2022 Highlights
- Mapping the Market covers median values and three-month percentage and dollar value change of 960 New Zealand suburbs;
- 154 suburbs have recorded falls of -1% or more in the three months to February;
- 94 of the suburbs with >1% price falls are in Auckland, 19 in Dunedin, 14 in Lower Hutt, six in Hamilton, five in Kapiti and four in Porirua;
- The largest quarterly fall was recorded in Muriwai (Auckland) down -10.3% to a median value of $1,337,650;
- 581 suburbs recorded a quarterly median value increase of at least 1%;
- The highest dollar gain in the quarter was Omaha (Auckland) up $253,000 (+9.4%);
- The highest percentage gain for the period was Fordlands (Rotorua District) of 15.4% ($61,000);
- Herne Bay retained its spot as New Zealand's most expensive suburb with a median property value of $3,726,900 (up $109,850 or 3.0% in the three months to February); and
- Cobden (Grey District) is the country's most affordable suburb with a median value of $231,900, up 1.4% or $3,100 in the quarter.
Explore the full CoreLogic NZ interactive market map here.
CoreLogic New Zealand