Property values fall for sixth consecutive month

Buyers continue to enjoy favourable conditions, with Cotality reporting a sixth consecutive monthly decline in New Zealand's housing market.

Cotality's latest figures show the national median property value declined 0.3% in September, leaving it 1.3% lower than a year earlier.

Cotality Chief Property Economist Kelvin Davidson said buyers continued to hold most of the negotiating power, thanks to plentiful listings and limited urgency in the market.

Although many sellers were not being forced to accept significant discounts, economic uncertainty was weighing on confidence and keeping sales activity subdued.

Mr Davidson said property values were showing mixed results across the country, with some provincial markets proving more resilient than the larger centres.

A longer-term perspective

While much attention has focused on how far property values have fallen since their post-Covid peak, Mr Davidson said it was important to consider the bigger picture.

Only around 83,000 properties changed hands during the second half of 2021 and first half of 2022, representing approximately 5% of New Zealand's housing stock. That means relatively few homeowners bought during the period when prices were at their highest.

For homeowners who purchased earlier, the picture may be quite different. Over the past decade, national property values have increased at an average annual rate of 3.2%, with 16 markets recording average annual growth of at least 7%.

In other words, while property values have fallen from their peak, many long-term homeowners may still be sitting on substantial capital gains.

When might prices recover?

Mr Davidson said improved housing affordability should help limit further price falls, although a strong recovery appears unlikely in the near future.

Elevated mortgage rates, economic uncertainty and a large number of properties available for sale are expected to keep prices relatively subdued.

First home buyers remain active, benefiting from improved affordability and greater choice. However, existing homeowners looking to upgrade are proceeding more cautiously, while many investors who rely on borrowing remain on the sidelines.

Mr Davidson said sustained price growth was unlikely until employment conditions and job security improved more significantly.

Thinking about entering the market? With buyers holding much of the negotiating power, now could be a good time to review your borrowing capacity.