Property downturn appears to be nearing an end
New Zealand's median property price has now fallen for nine out of the past ten months, after declining another 0.2% in December, according to CoreLogic.
That means the median is now 17.6% below its post-covid peak, although it remains 16.2% higher than in March 2020, when the pandemic began.
CoreLogic NZ Chief Property Economist Kelvin Davidson said that, since February 2024, the market had been trending downwards, with demand being sapped initially by high mortgage rates and then by a weak jobs market. However, we might be near the bottom now.
“We're still seeing some sluggish results in Auckland and Wellington, but firmer trends seem to be starting to emerge elsewhere,” he said.
“That would certainly be consistent with the influence of lower mortgage rates, particularly the falls for the internal serviceability test rates at the banks. The popularity of either floating loans or short-term fixes at present is helping those lower rates pass through fairly quickly too.”
What to expect in 2025
Mr Davidson said the key drivers of the property market appeared to be pulling in different directions – lower mortgage rates were stoking demand, he said, but the weak economy and abundance of listings were weakening it.
“We suspect that 2025 could prove to be a year of conflicting forces for New Zealand's housing market, with the net result being a relatively subdued upturn in sales volumes and property values. Our expectation is that values could increase by around 5% in 2025 across NZ as a whole, which would be pretty subdued compared to some past cycles,” he said.
"The recent falls in property values may well come to an end shortly, but one factor for the year ahead that the market hasn't had to contemplate before is likely to be the effect of debt-to-income (DTI) ratio rules. These may not be a factor for everybody and won't stop mortgage lending dead in its tracks. But by the middle of the year it certainly wouldn't be a surprise if the DTI limits are a very common part of the general discussion around New Zealand's mortgage market.
"In addition to an underlying economy which might take a bit of time yet to get back on its feet, the DTI caps are another reason for caution about the prospects for the property market in 2025.”
Thinking of buying?
Depending on your financial circumstances, now could be a very good time to buy – property prices have been declining, interest rates have been falling and the number of listings has been increasing.
Contact me if you’re thinking about buying a home or investment property, so I can organise a mortgage pre-approval for you.