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Whatever goes up must come down, though anyone witnessing the explosion in NZ property prices in recent years could be forgiven for doubting that old adage.
But nothing lasts for ever and 2022 is finally seeing a marked slowdown in sales and values compared to the feverish activity of a year ago, as interest rates rise and credit constraints bite and potential buyers fade into the background, or at least sit tight.
The latest QV House Price Index shows the value of the average home dropped by 3.4% nationally over the three months to the end of June, with the national average value now sitting at $1,011,188.
In the Auckland region, that figure is $1,441,941, which is a drop of 4.1% over the same period, though still 7% higher than the same time last year.
Only Rodney is showing any positive growth over the first six months of 2022, though only 0.2%, and QV expects that to drop in the coming weeks and months.
In Northland, home values dropped by an average of 2.3% this quarter, with Kaipara experiencing the largest average decline of 5.4%.
QV general manager David Nagel says the turnaround has been swift and sudden.
“Just six months ago, the national market was tracking at just under 30% value growth per annum,” he says. “This has fallen back quite dramatically, down to single figures, with further reductions inevitable over the coming months as this home value correction continues across Aotearoa.”
Nagel says a 3.4% drop might not sound much compared with price increases over the past few years.
“But when you look at the fall in value throughout the first six months of 2022, it becomes a lot more significant, particularly if you purchased at the peak of the market in late 2021.”
QV valuer Hugh Robson says the outlook is for more of the same, due to a number of factors.
“Over the past four to five weeks, the Auckland residential market has seen a continued decline in buyer activity, a decline in sale price levels, and an increase in selling periods,” he says. “Many auctions are ending without a single bid being registered, with negotiations often taking place later on behind closed doors.”
He says while home values continue to decline, building costs are currently doing anything but.
“The next six to nine months will be interesting, as there are many multi-unit developments currently under construction, with many just starting earthworks.”
However, those with property to sell are still being optimistic, with www.realestate.co.nz’s June property report showing that average asking prices – as opposed to selling prices or property values – remain stable.
And the Real Estate Institute of New Zealand (REINZ) says while the median residential property price for Auckland as a whole was down 2.2% compared to May last year, in Rodney it was up by 13.2%.
Meanwhile, REINZ says farm sales were down by 11% over the three months to the end of May 2022 compared with the same period last year, with Northland recording the biggest decrease in sales.
Rural spokesman Brian Peacocke says the categories most impacted have been arable, dairy, dairy support and horticulture, whereas finishing properties remained resilient.
“Like most sectors within the New Zealand economy, farming is feeling the full impact of increasing costs, particularly those relating to fuel, fertilizer, general farm inputs and interest rates, with the shortage of labour being a continuing impediment to productivity, particularly in the horticulture sector,” he says.
