Property downturn ends, with prices rising 2.1% in Q4

After an 18-month downturn, New Zealand's housing market turned the corner in the final quarter of last year, according to CoreLogic.

The national median price fell steadily between March 2022 and September 2023, before increasing 0.4% in October, 0.7% in November and 1.0% in December.

“A further rise in property values in December seemed almost inevitable given housing market sentiment has risen in recent months. This is off the back of several factors including the change of government, a peak - and even some falls - in mortgage rates, continued growth in employment, and soaring net migration,” CoreLogic Chief Property Economist Kelvin Davidson said.

Property prices increased 3.3% in Dunedin over the final three months of last year, as well as 2.9% in Christchurch, 2.5% in Tauranga, 2.4% in Hamilton, 2.0% in Wellington and 1.9% in Auckland.

Despite these price rises, New Zealand's median price remains 3.3% lower than in December 2022 and 11.4% lower than the peak in 2021.

Nevertheless, Mr Davidson said some buyers would still be wondering whether they could afford to enter the market.

“In fact, affordability pressures are still a major issue. Even though mortgage rates have dropped a bit for some durations, the most popular shorter fixed terms, such as one year, have been flatter at a high level. This is continuing to strain aspiring homeowners' ability to buy property,” he said.

“And of course, caps on debt-to-income [DTI] ratios remain on the cards within the next year, too. Sharper or more widespread falls in mortgage rates than the Reserve Bank would be comfortable with could perhaps bring forward the timing for those DTI restrictions, provided the banking processes are in place.”

CoreLogic's 2024 outlook

Mr Davidson said prices were likely to keep rising this year, but inconsistently, with variation from month to month and location to location.

“As such, although the general upwards trend for property prices is likely to continue in 2024, it may not be smooth from month to month, with some results stronger, but others much weaker,” he said.

“Underlying that patchy national picture would be variability at the regional level too, with the main centres potentially seeing the biggest boost from inwards migration, but provincial markets less supported.”

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