New Zealand house values fall for sixth month in September

New Zealand property values fell for a sixth straight month in September, with Cotality NZ's national Home Value Index down 0.3%.

Values were 1.3% lower than a year earlier, and the median value slipped to NZD $797,078, below the previous cycle low recorded in June 2023.

The monthly picture across the main centres was mixed. Hamilton rose 0.4% and Christchurch increased 0.2%, while Dunedin fell 0.1%, Tauranga declined 0.3%, Auckland slipped 0.5%, and Wellington recorded the largest drop, down 0.7%.

The figures point to a market where buyers still hold the balance of power, with sales activity subdued and price movements uneven across the country.

“The housing market remains cautious, with buyers still holding most of the negotiating power. While many vendors are not being forced to accept significant discounts, purchasers continue to benefit from plentiful choice and little urgency,” said Kelvin Davidson, Chief Property Economist at Cotality NZ.

“Economic uncertainty remains a key factor weighing on confidence across the broader housing market.

“As a result, sales activity remains subdued and value movements are patchy, although some provincial markets are proving more resilient than the larger centres,” Davidson said.

Auckland and Wellington

Auckland had another weak month, with all sub-markets posting declines. Papakura and Rodney both fell 0.1%, Franklin and Waitakere dropped 0.2%, while Manukau, Auckland City, and North Shore each declined by 0.5% or more.

Over the past year, Waitakere, North Shore, Manukau, and Auckland City have each fallen by about 3% or more. Over the past decade, those markets have averaged annual growth of 1.3% or less.

“In recent years, Auckland's property market has been restrained by a subdued economy, especially in the services sector, and caution among both businesses and households,” Davidson said.

“But the longer-term changes help illustrate the impact that a significant rise in housing supply can have on values and affordability. Annual average growth of around 1% in many parts of Auckland since 2016 is very low by past standards.

“Of course, that has created plenty of opportunities for purchasers, with first-home buyers in particular faring very well lately,” he said.

Wellington also recorded declines across the wider region in September. Kāpiti Coast fell 0.3%, while Porirua, Upper Hutt, and Wellington City each declined 0.6%. Lower Hutt recorded the region's steepest drop at 0.9%.

Among those areas, Kāpiti Coast was the most resilient over the past 12 months, with no annual change. Its 10-year average growth rate of 5.3% was slightly ahead of Porirua and Upper Hutt, both at 4.8%.

“Wellington has faced economic and property market challenges in recent years, especially as tight restraint on public sector spending has tended to dampen activity in other sectors too,” Davidson said.

“But over a longer horizon, property values have still seen annual average increases of 4-5% in many parts of the wider region.”

Regional markets

Outside the main centres, results were also subdued. Queenstown recorded a 0.6% rise and Rotorua edged up 0.1%, but many other markets fell by at least 0.6%, with Napier and Whanganui both down 1.0%.

Rotorua, Queenstown, and Invercargill were among the more resilient markets over the past year. Over 10 years, Whanganui, Gisborne, and Invercargill have each recorded annual average increases of about 8%.

Some regional centres, particularly in the South Island, have been supported by tourism and farming, although that has not insulated them from wider pressures, Davidson said.

“Many of our regional centres, especially in the South Island, are seeing decent economic growth on the back of tourism and farming, with spillover support for their housing markets too.

“However, even these stronger areas still face the same higher interest rates and election-related uncertainty, especially for property investors. This is illustrated by some patchy results in September.

“Even so, the average changes over longer periods of 10 years highlight the general resilience we've seen in areas such as Southland and the regional North Island,” he said.

Longer view

Davidson said the recent declines should be viewed alongside longer-term market trends. He noted that around 83,000 property transactions took place during the second half of 2021 and the first half of 2022, representing roughly 5% of New Zealand's dwelling stock.

“The peak of the market remains highly relevant for those who bought at that time, but it's important to remember that only around 83,000 property transactions occurred during the second half of 2021 and first half of 2022, representing roughly 5% of New Zealand's dwelling stock.

“Over the past decade, national property values have increased at an annualised rate of 3.2%, with 16 markets recording average annual growth of at least 7%.

“For many homeowners, the post-Covid peak was an unusually elevated period rather than the most meaningful benchmark. Looking across a longer horizon, property values have generally remained resilient,” he said.

Outlook

Housing affordability has improved in recent years, which could help limit further declines, but current conditions do not point to a sharp rebound. Elevated mortgage rates, economic uncertainty, and a high level of listings are expected to weigh on value growth.

“First-home buyers remain highly active and continue to benefit from favourable purchasing conditions, including improved affordability and greater choice.

“At the same time, upgrading owner-occupiers are acting more cautiously and many leveraged investors remain on the sidelines.

“Until labour market conditions and job security improve more meaningfully, sustained house price growth appears unlikely. At this stage, a return to consistently rising values still looks some way off,” Davidson said.