Interest rate hikes and tighter lending rules have triggered the biggest property sales slump in nearly 40 years.
Figures from CoreLogic NZ show 60,859 properties were sold in the year to February 2023 – the lowest 12-month total since October 1983. For the month of February alone, about 4,100 deals were done. That is the lowest for that month of the year since at least 1981.
The data is part of CoreLogic NZ’s new Housing Chart Pack which provides metrics on the residential housing market every month.
CoreLogic NZ chief property economist Kelvin Davidson said the figures are striking and show just how quiet the market really is.
“Few vendors are in a hurry to sell, given that unemployment remains low. And those buyers who have secured finance know that they can take their time too, with listings abundant and prices falling. This is a recipe for low levels of sales,” Davidson said.
First-home buyers pull back
There are also indications that first-home buyers could be beginning to retreat from the market.
“There may now just be signs of their interest rate limits being reached. Of course, it may also be that they’ve actively pulled back while they wait for prices to fall further. Either way, their share of purchases edged lower in February so it’s definitely something to watch,” he said.
And while a recession looms (if it’s not here already), house prices might find a floor later in the year, Davidson said.
“A key part of that will be the labour market. If employment can stay high with unemployment only rising because of a larger labour force, this should insulate property values to some degree. But outright job losses would be a fresh headwind for the housing market,” he said.
“Nothing is ever certain when it comes to the economy and especially economic forecasts. But the latest weak GDP data and the global banking issues highlight a possibility that the official cash rate won’t rise all the way to 5.5%.
“If mortgage rates start to edge lower, net migration continues to rise, and investors start to see value again, the case would be building for this house price downturn to find a floor in 2023.”
Key highlights:
- Number of homes sold on a 12-month basis at 40-year low.
- House sales in the 12 months to February 2023 are down a third (-32.7%) on last year.
- There are 16% more listings on the market than this time last year.
- Property values are down 1% in February, -1.5% in the past three months, and -8.9% over the year.
- Wellington is the weakest of the main centres, with values down 19.7% from the peak, while Christchurch is only 4.7% down since its peak.
- Cash multiple property owners (including investors) make up 15% of purchases, a record share for this type of buyer.
- First-home buyers (24%) and relocating owner-occupiers (27%) take a reasonable slice of the sales market, but first-home buyers may be starting to wane a little.
- Rents are falling in Auckland ($583 a week, down 0.8% annually) and Wellington ($595 a week, down 3.7% annually).
- An economic recession may now be close (if not already here) as the property market faces multiple challenges including existing borrowers rolling onto higher mortgage rates.
