Ashley Church: property commentator on house prices continuing to decline

New data shows that house prices have dropped for the fourth consecutive month in June.

The Real Estate Institute of NZ shows that across the entire country, the HPI declined by 0.8 percent in June compared to May.

Property commentator Ashley Church says the cause of this downturn goes all the way back to 2021, when Covid impacted interest rates.

"The Reserve Bank, as a result of that, recognized what it had done, reversed course and increased the OCR, which had the effect of increasing mortgage interest rates over the following two years. So the result of that is basically what we're dealing with."

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Episode Transcript

Speaker 1 (00:00):
At the same time, congratulations, homeowners. House prices in our
biggest cities are also falling. This is according to the
latest Real Estate Institute figures. The median house prices in Wellington,
Auckland and christ Church respectively have decreased in June. Nationwide
medium price for a house seven hundred and seventy thousand,
exactly the same as it was in June last year.

(00:22):
Ashley Church is a property commentator and is with us now, Hey, Esley,
get it?

Speaker 2 (00:27):
Ryan?

Speaker 1 (00:28):
Jeez?

Speaker 2 (00:28):
Yeah.

Speaker 1 (00:29):
Not not great news, is it, especially for the big
cities when you're wanting when you want to feel a
bit rich.

Speaker 2 (00:36):
Yeah, it's interesting, isn't it. So? I think probably the
important thing here is not to fixate on the on
the numbers on a month, month, or even at the moment,
on an annual basis. It's probably worth more looking at
the causes of this and what's likely to change over
the next little world. So the causes are pretty well
known and trumpeted. This goes back to twenty twenty twenty

(00:56):
one in that massive drop in interest rates as a
result of the OCA being dropped by the Reserve Bank
at the time, overshooting the mark and effectively creating our
housing boom push prices up way beyond where they might
have been expected to go under a normal cycle. And
then the Reserve Bank, as a result of that, recognizing
what it had done, reversing course and increasing the ocr

(01:18):
which had the effect of increasing mortgage interest rates over
the following two years. So yeah, and the result of that,
basically is what we're dealing with now we've had it.
We've had a couple of years of the reserve banks
starting to reduce those rates again. So big take, because
the first cause of house price growth is a lower

(01:39):
cost of money, and so that's been coming down, and
so the confidence or the lack of confidence that we
had in the market for a long time because it
was costing too much basically to borrow money is kind
of dissipating. But that's been replaced ryan by a survey
of listenings which has come about over the last twelve

(01:59):
or eighteen months. And the reason that's happened is because
people seeing house price is decreasing over the last sort
of two two and a half years, rather than putting
their houses on the market and selling them for less
than they thought they were worth, basically just chose to
hold on to them, and once those prices stabilized and
sort of set a new benchmark, then they started putting
them back out onto the market. So listings have increased,

(02:21):
so it's basically supply and demand there. So the reason
you're seeing these prices sitting at a relatively stable level
is because there are so many listenings on the market
relative to the number of people that are actually out
there prepared to buy. So that's a really long answer
to your question, but it basically explains what's happened over
the last two or three years. That's not going to
change until those listings are basically mopped up, and that's

(02:43):
going to take probably another twelve months to eighteen months
before we start to see any real change in house
prices and prices starting to slowly increase again.

Speaker 1 (02:51):
And when you say increase again, do you mean take
off like a rocket or you mean, well it just
you know, we're not going to see the types of
increases we saw post COVID, But are we going to
see a boom?

Speaker 2 (03:05):
The shortlandswer that is yes, And the reason I say
yes with some degree of confidence is simply based on
the evidence of the last forty years. When I say
the last forty years to forty years prior to twenty twenty.
So we know that every ten years on average since
since nineteen eighty, house prices have doubled, and the pattern
for that has been six or seven years during which

(03:26):
they've doubled, and then a two or three year period
where they've basically sat flat, So ten years in total
each time, So that's that's an empirical measure that we
can look at. So everything suggests that that trend will continue.
So at some point the market will kick off again,
and that's obviously not going to happen till those listings
are mopped up, and at some point the supply of

(03:47):
listings is going to diminish to a point where we
get this thing called fomo fear of missing out, and
so people are going to be prepared to pay more
in order to get a property over some other punter
who also wants to buy the same property. And the
crucial part of that that's been missing over the last
two or three years has been the cost of money
was too high. That's now fixing itself as well. So

(04:07):
sure answer tickue, that wasn't very short, but that wasn't
at all, but anti tech question is yes, yeah, anti
tech question is yes, We just don't know when that's
going to happen.

Speaker 1 (04:18):
Okay, well that's we'll be reassuring for people. Actually, thank
you for that asty church property commentated.

Speaker 2 (04:23):
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