December has recorded a ninth drop in ten months, making a familiar pattern of declining prices. Such news is a key indicator that a slow recovery may be on the horizon.
New Zealand Median Price House values during the year to December have declined by $32,200, or a 3.9% year-on-year fall. Even with these, declines property values remain 16.2% higher than the same time in March 2020.
The national market demonstrated mixed results in December of last year. Some cities like Hamilton, Tauranga, and Dunedin experienced slight price increases while Auckland and Wellington experienced falls. Regardless, the low property prices are largely down to an oversupply of available properties for sale including both newly built and established homes.
Properties in Wellington have thus become more affordable and further reductions are expected due to economic uncertainty triggered by public sector cutbacks. The property market has also seen several blows that have negatively impacted demand. Such setbacks include rising mortgage rates, a weakening labour market and a heightened supply of houses. Recently, however, the pace of decline has eased markedly, perhaps suggesting that the market is about to hit a point of stabilization.
Lower mortgage rates are now filtering through, particularly with the uptake of floating loans and short-term fixes. These factors combined have provided subtle boosts to property values in certain areas. Such areas include smaller centres where affordability and local economic buoyancy, often supported by farming industries, are stronger.
Although low interest rates on mortgages offer promise, job security and credit restrictions including debt-to-income ratios weigh on the market. Such restrictions are likely to become more pronounced by the middle of the year and could create more hurdles for buyers, especially those with limited capacity for borrowing.
Relative resilience has been more evident in smaller population centres, with cities like Napier, Palmerston North, and Nelson enjoying increases during December. However, a national and dramatic surge in property prices is not likely before the labour market improves.
Overall, property prices are forecast to increase, albeit slowly, by around 5 per cent in 2025. Such a minor recovery is attributed to the still-retreating effects of economic fracture and regulatory constraints. For now, the property market in New Zealand looks like slowly moving to a point of stability, although wider economic improvements will be necessary for more sustained growth.
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