New Zealand property market prices dipped in April
New Zealand’s property market saw a modest drop in April, the first drop since the initial COVID-19 lockdown in August 2020.
According to CoreLogic, property values fell 0.8% in April, led by declines of 1.6% in Auckland and 1.5% in Wellington.
Price movements were mixed across the country, with prices in Christchurch rising 0.5% while Hamilton was flat.
CoreLogic NZ research director Nick Goodall said rising interest rates had made it harder for borrowers.
“Affordability remains a major constraint in the market as rising interest rates impact the number of eligible borrowers and the amount they can borrow,” Mr Goodall said.
“This is on top of tighter credit availability through greater scrutiny of borrower spending through CCCFA changes as well as tighter Loan-to-Value (LVR) restrictions that continue to bite. “
Growth in Christchurch, combined with declines in value in Dunedin, has seen the average value of the two South Island cities move away from each other.
Values have fallen 2.9% in Dunedin over the past three months, the biggest quarterly decline in more than 13 years.
Likewise, the 2% drop in the Wellington area over the past three months is also a record since the GFC. Lower and Upper Hutt are the main contributors to the regional deterioration, with declines of 3% and 2.6% respectively during the month.
Tauranga property values previously defied recent market softening, but a 0.3% drop in April could be the first sign that momentum is running out.
Auckland’s size and diversity have seen mixed results recently, with April’s 1.6% decline more than reversing March’s 1.4% growth.
Despite recent weakness, Mr Goodall said employment in New Zealand was strong, which was a positive sign.
“Currently the labor market is tight, which probably means strong competition for people and should lead to higher wages,” he said.
Mr Goodall said home buyers are now watching closely how much the Reserve Bank of New Zealand raises the spot rate.
“However, the trajectory of the OCR forecast is what is of most interest and the expected spike of over 3% is no doubt keeping some potential buyers waiting in a declining market environment alongside rising interest rates. interest,” he said.
“Aside from interest rates, there seems to be a feeling that credit availability could come out of the worst of times.
“High LVR loans have fallen well below allowed speed limits and with pre-approvals back on the table and stories of banks more comfortable reopening, we could see a small increase in ‘otherwise locked-in buyers’. although this group of buyers is likely to be relatively small.
Mr Goodall said the property market should continue to soften as the RBNZ continues to tighten.
“The slowdown/slowdown appears to be entrenched, but will likely unfold gradually, as long as the labor market remains tight,” he said.
“It should be noted that mortgage viability test rates have also increased with real interest rates.
“While this likely contributed to the reduction in lending and transactions, it should serve as a test that borrowers can withstand interest rate hikes.”