2023: A Turning point For The NZ Housing Market
A 'year of two halves' aptly describes New Zealand's property market performance in 2023, according to CoreLogic's Best of the Best report.
A 'year of two halves' aptly describes the country's property market performance in 2023, where declining sale volumes and house prices characterised the first half of the year, before finding a floor.
Sale volumes hit the lowest level in about 40 years in April, with a 12-month moving total of just 60,475, while national property values declined a further 5% over the year.
Featherston was the weakest performer over the past year with values down 16.6%, while the top-ranked Sunshine Bay in Queenstown saw 6.6% growth, which is relatively moderate annual growth for the top performing suburb.
Herne Bay in Auckland maintained its position as the most expensive suburb with a median value of $3,161,400. Cobden in Grey is the most affordable suburb at $258,200.
CoreLogic NZ Chief Property Economist Kelvin Davidson said signs of a turnaround began emerging around May or June, off the back of changes in credit cost and mortgage availability.
"Mortgage rates have certainly inched higher in recent months, but after basically doubling from mid-2021 to late 2022, the rate of increase slowed right down in 2023," Mr Davidson said.
"Against that backdrop, we also saw the restrictive CCCFA rules ease from May 1st, and then the loan to ratio (LVR) rules were also relaxed a little from 1st June."
Sale volumes rose in the second half of the year, however Mr Davidson said listing flows coming to the market remained relatively low in 2023.
"Sales volumes are now rising pretty consistently from month to month, although from such a low base, even strong percentage gains of 10-15% haven’t yet translated into large increases in the number of deals."
Hargest in Invercargill is certainly one suburb where properties are selling fairly quickly, with median days on market of just 11. Ohakune, however, is at the other end of the spectrum with the average days on market sitting at 115.
Mr Davidson said another influence in 2023 which came as a surprise to almost everybody, was the surge in net inwards migration to New Zealand.
"While this hasn’t necessarily stimulated sales volumes or house prices on its own, there are certainly signs that it’s put significant pressure on an already-constrained supply of rental property – with vacancy rates dropping, and inevitably, rent prices accelerating."
Evidence of that can be seen in many parts of the country, but certainly in suburbs such as Fairview Heights in Auckland where the median weekly rent has surged 32.4% in the past year.
Housing market enters next cycle
As the housing market moves into its next phase, Mr Davidson said it will be important to keep an eye on how the labour market and mortgage repricing process goes in 2024. While households have adjusted well so far, it remains a key factor to watch.
"The New Year will likely kick off positively in terms of mood, with a new property-friendly Government looking to shorten the Brightline Test back to two years and steadily reinstate full mortgage interest deductibility," Mr Davidson said.
"This could start to pull some investment demand back into the market, and may see some existing investors find themselves off the hook for capital gains tax sooner than expected."
"But even if some investors do start to buy again, it’s not likely to be a torrent, due to low rental yields and high mortgage rates. First home buyers should still be able to find good opportunities, as they continue to benefit from accessing KiwiSaver for deposits and make full use of the low-deposit lending speed limits at the banks."
Mr Davidson said caps on debt to income ratios remain firmly on the cards for 2024, but high mortgage rates are currently doing the job of restricting any risky, high debt to income (DTI) lending.
As for property sales, Mr Davidson expects a more subdued upturn than in previous cycles.
"We're anticipating sales rising by perhaps 10% and prices seeing growth of around 5%, which is still below long-term average levels. Put another way, 2024 could prove to be the year of the underwhelming upturn."
Key data from the CoreLogic 2023 Best of the Best Report
Highest median value: Herne Bay (Auckland) $3,161,400
Lowest median value: Cobden (Grey) $258,200
Highest 12-month change in median value: Sunshine Bay (Queenstown) 6.6%
Lowest 12-month change in median value: Featherston -16.0%
Highest five-year change in median value: Mataura (Gore) 138.9%
Lowest five-year change in median value: Auckland Central -8.8%
Top sale price: 120 Victoria Avenue, Remuera, Auckland (18 Jul) $23,800,000
Highest change in median rent: Fairview Heights (Auckland) 32.4%
Lowest change in median rent: Herne Bay (Auckland) -14.5%
Highest gross rental yield: Whanganui (suburb) 8.5%
Lowest gross rental yield: Whitford (Auckland) 1.1%
Shortest days on market: Hargest (Invercargill) 11 days
Longest days on market: Ohakune (Ruapehu) 115 days