With the spring selling season on the horizon New Zealand property sales continue their upward trend, however buyers remain in control with sales volumes below normal.
However, sale volumes remain well below normal levels for the time of year, with the latest monthly total of 6,320 still around 15% below the 10-year average for August.
The subdued levels of sales, combined with a reasonably steady flow of new listings coming onto the market each week, is contributing to a rise in the number of properties currently listed for sale. Total listings are up by 13% from a year ago, to the highest September level for at least six years.
CoreLogic NZ Chief Property Economist Kelvin Davidson said that with listings plentiful on the market, the relatively low levels of sales are more about buyer caution.
“Clearly, lower mortgage rates will be boosting sentiment, but a reduction in job security will be pushing the other way in terms of buyers’ confidence.”
“Of course, in this environment of low turnover, we’re also seeing property values drop, and that will tend to benefit some groups over others. Those who still feel confident about their jobs and can get the finance are in a position to take their time and secure a deal in their favour. This includes first home buyers at present, whereas mortgaged investors are still a little more circumspect.
“Buyers will be spoiled for choice, for example, in Wellington, Bay of Plenty, Auckland, and Otago, as total stock in each of these regions has risen by 20-25%.”
Mr Davidson indicated although affordability conditions are likely to improve from a stretched starting point and lower mortgage rates should follow from the RBNZ’s OCR cutting cycle, it may take time for the effects to fully materialise.
“As mortgage rates drop, the pool of willing and able buyers will start to grow again, and slowly erode that high level of listings, resulting in more competition and some upwards price pressure.
“But this might not happen overnight, however, given that interest rates are still relatively high, and existing mortgage borrowers on pre-agreed fixed rates won’t see the benefits of any cuts straightaway either.
Another cash rate cut seems all-but certain next month in October, helping mortgage rates to fall further too. But although property values may not fall much further, a fresh boom seems unlikely when affordability remains stretched, listings abundant, and the labour market weakening.”
New Zealand’s residential real estate market is worth a combined $1.62 trillion.
The CoreLogic Home Value Index (HVI) fell by a further 0.5% in August, the sixth decline in a row, taking the drop from February’s ‘mini peak’ to 3.7%. Auckland fell again in August, and is now down by 6.0% from the peak. By contrast, however, an area such as Christchurch has proved to be more resilient.
Property values in NZ edged up 0.7% in the year to August, only due to a short burst of growth around the end of 2023/early 2024. Over the three months to August, values dropped 2.2%.
August sales volumes nationally were 1.6% higher than the same month last year, which was the 15th rise in the past 16 months.
There were 75,447 sales in the year to August, still well below NZ’s longer-term average of about 90,000 per year.
There were 8,175 new listings over the four weeks ending 8th September.
National rental growth has clearly settled into a more subdued phase, and was 1.4% in the year to August, which is comfortably below the long-term average of 3.2%.
Gross rental yields nationally now stand at 3.8%, which is the highest level since mid-2016, however still below term deposit rates.
Around 65% of NZ’s existing mortgages by value are currently fixed and due to reprice onto a new mortgage rate over the next 12 months. That will generally involve a reduction in borrowing costs.