Positive Signs Emerge as Property Value Decline in New Zealand Slows
In May, CoreLogic reported property values throughout Aotearoa NZ experienced a further decline of 0.7%. However, there are positive signs that the ongoing downturn may be nearing its end, as the annual rate of change is starting to ease.
On a national scale, despite decreases over the last 12 months, values remain $194,000 higher than the pre-COVID level observed in March 2020. The annual rate of change has slightly improved from -10.3% in April, providing tentative evidence of a slowing decline.
According to Nick Goodall, the Head of Research at CoreLogic NZ, there are several positive indicators for homeowners. These include the moderation of house price declines and the recent forecasts by the Reserve Bank of New Zealand (RBNZ) suggesting that the Official Cash Rate has likely reached its peak. These factors contribute to a more optimistic outlook for homeowners.
“While the OCR is at a relatively high level of 5.5% following a total increase of 525 basis points over the last 20 months, this expected ceiling for interest rates reinforces our view that a possible floor in prices is approaching,” he said.
“This has been an exceptionally fast and impactful monetary policy tightening cycle and the RBNZ has effectively said now is the time to pause, and wait and see how this plays out, as mortgage holders continue to adjust to increased mortgage payments, reducing spending elsewhere in the economy.”.
Nick Goodall noted that a temporary increase in the cash rate could offer some reassurance to many New Zealand property owners facing the upcoming wave of refinancing. These borrowers are approaching the end of their current interest terms within the next year.
“Mortgage holders and aspiring homeowners should now be able to quantify the worst-case scenario for their mortgage repayments which will give both them and their bank confidence in assessing serviceability test rates,” he said.
According to a report from the NZ Bankers Association, approximately 45% of mortgage holders are making early repayments.
“This buffer will be beneficial to the financial situation of many property owners with mortgages and provide another level of comfort,” said Keith Niederer, NZ Network Manager at Raine & Horne.