Property prices across New Zealand have continued to rebound, with values up 0.4 per cent in January, according to CoreLogic NZ.
Since September’s trough, property values have risen 2.5 per cent, bringing the national average to $928,184, or 11 per cent below the recent peak.
However, the rate of growth is slowing, with the 0.4 per cent increase down on November (0.7 per cent) and December (1 per cent).
Across the country, Wellington and Hamilton recorded mild growth of 0.1 per cent and 0.2 per cent respectively in January, while Tauranga and Dunedin saw gains of at least 0.6 per cent.
CoreLogic NZ Chief Property Economist, Kelvin Davidson, said the slowdown in the pace of monthly gains was a timely reminder the emerging recovery trend remains tentative and shows some variability from region to region.
“The mood in the housing market has certainly turned since the middle of last year, given a fillip by the change of government, and its property policies that are friendlier to investors,” Mr Davidson said.
“This mindset shift is reinforcing the effects of the underlying fundamental drivers, such as continued employment growth, and high migration.”
Mr Davidson said proposed changes to debt-to-income ratios (DTI) and loan-to-value ratios (LVR) by the Reserve Bank of New Zealand (RBNZ) have likely helped sentiment.
“Certainly, some buyers will already be starting to anticipate a likely easing in the LVR rules from the middle of the year, which will allow more owner-occupiers to purchase with less than a 20 per cent deposit, and reduce the required deposit for investors from 35 per cent to 30 per cent.”
He said even though most indicators were pointing up, there’s still the challenge of high mortgage rates to contend with, both for new borrowers and those who are repricing existing loans.
“Granted, there’s now a whiff of official cash rate cuts on the horizon, which will help mortgage rates to drift lower on the popular, shorter fixed terms, but that’s probably a story for the second half of 2024, not the first,” he said.
Within Auckland, Franklin recorded the strongest rise in average property values in January, with a lift of 2.1 per cent.
“A bit of lingering weakness in that market over the prior months was always likely to be ‘caught up’ at some stage,” Mr Davidson said.
Manukau also saw values rise by more than 1 per cent, but the rest of the Auckland submarkets were a little softer in January, including no change in Waitakere.
Over the past three months as a whole, Papakura has been a bit sluggish (down 0.1 per cent), but most other parts of Auckland have seen gains of 1.6 per cent or more.
“Auckland’s property market has certainly started to turn around, and although significant net migration inflows are probably boosting rents more than house prices at this stage, the effects of strong population growth will still be accumulating across the various segments,” Mr Davidson said.
Wellington’s sub-markets generally saw further growth in January, with Lower Hutt and Kapiti Coast both up by at least 0.5 per cent.
But Wellington City itself was a little more subdued (0.2 per cent rise), and Porirua dropped by 1 per cent to start the year.
Mr Davidson said when taken over a slightly longer three-month horizon, Porirua has still shown an increase of 1.5 per cent, with Lower Hutt up by nearly 5 per cent, and gains of 2 to 3 per cent over the same period in Kapiti Coast and Upper Hutt.
“The wider Wellington property market is certainly playing a part in the emerging national upturn, especially in the two Hutt Valley areas,” he said.
“That said, these parts of the country, and especially Wellington City itself, could become very interesting markets to watch should the government decide to pare back the size of public sector workforces more significantly in the coming years.”
Looking forward, Mr Davidson said he expects sales volumes and house prices to track higher in 2024, but with variability from month to month, and across regions.
“The main centres are no doubt being boosted at the moment by extra demand from large migration inflows,” he said.
“But with typically higher ratios of house prices to incomes than the provinces, the proposed DTI rules may become more binding in the cities over the medium term after they come into effect.”
Mr Davidson said a key theme for this year will also be the relative shifts in activity for first-home buyers and mortgaged investors.
“In 2023, first-home buyers had a blinder, dominating in terms of market share,” he said.
“However, higher rents, greater interest deductibility, lower deposit requirements, and a possible drop in mortgage rates could pull some investors back into the market in 2024.”