Property correction may be over as signs of emerging growth appear

New Zealand's property downturn may now be over, although it's too early to say for sure.

Prices remained flat in September, according to CoreLogic, potentially ending a 17-month correction.

Since peaking in March 2022, New Zealand's median property price has fallen 13.2%, although it's still 24.3% higher than the start of the pandemic in March 2020.

Focusing on the bigger markets, prices rose by 0.4% in Auckland – the city's first increase since March 2022 – as well as 0.2% in Christchurch and 0.2% in Dunedin, while prices were unchanged in Wellington, and fell 1.5% in Hamilton and 1.2% in Tauranga.

Green shoots have started to appear

Speaking before the election, CoreLogic Chief Economist Kelvin Davidson said it was only a matter of time before the market bottomed out.

“Housing market confidence seems to have turned a corner, supported by a rough peak for mortgage rates, high net migration flows, a still-solid labour market and an easing in credit conditions. A growing expectation that National may lead the next government, with more ‘property friendly’ policies, may well be playing a role here too,” he said.

Mr Davidson also said there were signs of “emerging growth we’re starting to see in the data”, although conditions differed from region to region.

“This patchiness among the main centres may well continue in the coming months, and is likely to be a feature elsewhere in New Zealand too. After all, while we have broadly reached a trough in the market, we’re not expecting the next phase of growth to be swift or sudden either given mortgage rates remain challenging for many households.”

What to expect in 2024

Mr Davidson said property sales activity and prices were likely to rise in 2024. 

“That said, this emerging growth could be pretty muted by past standards, given that housing affordability is still problematic, mortgage rates aren’t set to fall anytime soon, and there’s also still the very real possibility of caps on debt to income ratios next year,” he said.

One potential event that could impact the market in 2024 would be if investors felt debt-to-income (DTI) restrictions were set to be imposed and decided to bring forward purchases to get ahead of any rule changes, according to Mr Davidson.

“That could make things trickier for first home buyers for a while, after a period where they’ve enjoyed reduced competition from other buyer groups. But after any DTI restrictions are imposed, first home buyers may find conditions more to their liking again.”

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