Owen Vaughan: OneRoof Editor on latest data suggesting ‘possible floor approaching’ in plummeting house prices

The tide may be turning on tumbling property values after three analysts all judged fresh real estate data shows a “possible floor in [house] prices is approaching”.

New reports from OneRoof, CoreLogic and ANZ Bank point to potentially better times ahead for homeowners, despite interest rates likely staying higher for longer.

Today’s latest OneRoof-Valocity House Index showed New Zealand’s average property value fell 2.3 per cent ($22,000) to $950,000 in the three months to the end of May, as successive interest rate rises put downward pressure on prices.

Auckland’s average value fell a further 3.2 per cent ($43,000) over the quarter to $1.29 million, but there were some bright spots with Northland, Otago and West Coast enjoying lifts in their average property value, while the rate of decline slowed in Canterbury, Taranaki and Wellington.

CoreLogic, in its own data released this morning, said property values fell nationwide in May but the rate of change had eased.

The 0.7 per cent fall in May was “tentative evidence” the downturn was winding up, CoreLogic said.

Average values were 10.2 per cent down on a year earlier, but still well above pre-lockdown levels in March 2020.

CoreLogic NZ head of research Nick Goodall said indicators such as moderating house price declines and the latest Reserve Bank Official Cash Rate (OCR) forecasts were positive signs for homeowners.

“While the OCR is at a relatively high level of 5.5 per cent following a total increase of 525 basis points over the last 20 months, this expected ceiling for interest rates reinforces our view that a possible floor in prices is approaching,” Goodall said.

Earlier this week ANZ Bank New Zealand dialled back its expectations for house prices to keep heading south, predicting a relatively sharp turn in the near term.

The country’s biggest lender is now forecasting a 1.6 per cent quarterly increase in each of the September and December quarters, having previously predicted a 0.4 per cent decline in the September period followed by a 0.4 per cent increase in December.

That means ANZ’s economists forecast annual house prices to increase 0.1 per cent in the December quarter, an earlier turnaround than June 2024 quarter increase predicted just last month.

ANZ said the Reserve Bank of New Zealand’s muted response to the fiscal impulse in the Budget surprised its economics team, who had expected looser monetary policy than they’d previously predicted.

“In short, housing tailwinds now appear to be blowing a little stronger than the headwinds. But we’re not convinced the RBNZ will be able to let that run,” the ANZ economists said in their property focus report.

“We expect the RBNZ will need to tighten monetary conditions later in the year once all has been revealed in the data.”

CoreLogic's head of research Nick Goodall. Photo / Supplied

NZ Mortgages managing director Nathan Miglani said if the interest rate peak had not already been reached, the country was getting very close to it.

“We anticipate rates beginning a gradual descent from late 2023, so our general advice is to fix for a short term where possible, say one year or 18 months,” Miglani added.

“With interest rates likely to fall, fixing for a long term could mean a hefty breakage cost if circumstances change and you need to restructure early.”

Some buyers believed rates had already peaked, and were now making decisions based on the idea rates will go down, Miglani said.

“Despite the doomsday property market stories many Kiwis are hearing, average asking prices are still above what they were before Covid-19, and this should be viewed as good news for property owners concerned about shrinking equity,” he added.

There are still forces pulling against property values, however.

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