New Zealand property sales fall as market stays weak

New Zealand property sales fell 11.6% year on year in August to 6,175 deals, marking the eighth consecutive monthly decline, Cotality said.

Higher mortgage rates and broader economic uncertainty have added to signs of a market struggling to regain momentum. Cotality's latest housing data shows first-home buyers continue to increase their share of purchases, while existing owners remain reluctant to move, keeping overall turnover weak.

Kelvin Davidson, Chief Property Economist at Cotality, said recent borrowing cost increases had created another obstacle for activity.

"First-home buyers remain a key presence in the property market, accounting for a combined 29.1% of purchases across July and August, hovering at record highs," said Kelvin Davidson, Chief Property Economist at Cotality.

"At the same time, movers remain relatively subdued, which is one reason sales activity remains weak even though affordability has improved."

The pattern points to a market where some entrants have found conditions easier than in recent years, but many existing homeowners have still chosen not to transact. That has limited completed deals even as buyers have had more options.

Buyer leverage

Listing levels remained elevated across much of the market, giving buyers more room to negotiate on price. Davidson said the balance of bargaining power had shifted towards purchasers rather than sellers.

"This high level of choice is giving buyers a lot of the pricing power," he said.

He also distinguished the current slowdown from earlier housing downturns, arguing that many vendors were not under acute financial stress.

"Most vendors won't be in a forced-selling position, so prices aren't collapsing," Davidson said.

That dynamic has helped keep values soft without triggering a steep correction. Cotality's Home Value Index fell another 0.4% in August, with Auckland and Wellington remaining weak while Christchurch showed greater resilience.

"In this buyer-friendly market, property values remain subdued," Davidson said. "The Cotality Home Value Index dipped by another 0.4% in August, with Auckland and Wellington still sluggish, but Christchurch more resilient."

Uneven market

The latest figures suggest the housing market remains uneven across buyer groups and regions. First-home buyers have made up a larger share of activity, supported by improved affordability compared with the market's more heated phases, while repeat buyers and movers have stayed cautious.

That caution has weighed on turnover, which is often a broader gauge of confidence than price changes alone. When existing owners stay put, fewer properties circulate through the market, reducing transaction volumes even if demand from newer entrants remains.

Rising official and retail borrowing costs have added to that restraint. Higher finance costs can affect both purchasing power and sentiment, particularly for households considering a discretionary move rather than a first purchase.

Labour focus

Davidson said employment conditions may be central to any improvement in activity and prices.

"All in all, the housing market remains subdued and it's difficult to see what changes this holding pattern in the near term," Davidson said. "The labour market may hold the key. Rising employment and better job security may be required before we could expect any kind of growth in property values, although some investors will be buoyed by Labour's announcement that they'll keep interest deductibility."

His comments suggest financing conditions alone may not determine the market's next move. Even with affordability metrics improved from previous peaks, households may still defer purchases or sales if they are uncertain about income security or the wider economy.

Improved affordability remains one of the main counterweights to the current weakness in turnover and price growth.

"Of course, this weak patch has seen affordability improve significantly, so there are always two sides to the coin," Davidson said.