REINZ May Data: Buyers Step Back, Annual Median House Price Growth Recedes

Tighter credit conditions, higher mortgage rates and increased housing supply continue to affect the New Zealand property market. Sales are slower to complete, property is staying on the market longer and upward pressure on prices is easing, according to the latest data and insights from the Real Estate Institute of New Zealand (REINZ), home of the most complete, accurate and up-to-date real estate data in New Zealand.

Across New Zealand, median prices for residential property increased 2.4% annually, from $820,000 in May 2021 to $840,000 in May 2022. Month-on-month, this represents a 4.0% decrease from $875,000 in April.

The median residential property price for New Zealand excluding Auckland increased 7.6% annually from $678,500 in May 2021 to $730,000 in May 2022. There was a month-on-month decrease of 3.3% from $755,000.

One region showed negative annual median price growth. Auckland was down 2.2% compared to May last year, from $1,150,000 to $1,125,000. The last time the annual median price dropped in Auckland was October 2019 (-0.1%). The region also recorded a month-on-month decrease of 3.9% — down from $1,171,000 in April. There was variance across the Auckland districts; well-established areas such as Auckland City (-12.9%) and North Shore City (-1.9%), and the up-and-coming Papakura District (-4.0%) all saw decreases. Conversely, all other districts were up, most notably Franklin District (+19.2%) and Rodney District (+13.2%).

Hawke’s Bay’s May 2022 median price mirrored May 2021’s median showing no annual median price movement.

In May 2022, the West Coast was the only region to achieve a new record median price, reaching $395,000 — up 30.8% from $302,000 at the same time last year. This was the first record price in the region since December 2021.

Overall, May 2022 had the least number of record median prices in a May month since 2019.

Five territorial authorities (TAs) achieved record medians. Selwyn District and Waitaki District are the TAs with the most record months in the past 12 months (8), and Wairoa District has the least with no median price records in the past year. More information on activity by region and TA record median prices can be found in the regional commentaries in the REINZ Monthly Property Report.

Jen Baird, Chief Executive at REINZ, comments: “Looking at New Zealand as a whole, median prices increased 2.4% annually to $840,000 in May 2022. Month-on-month, there was a 4.0% decrease in median price. Moving from April to May, we tend to see a marginal dip in median property prices. This month, the seasonally adjusted figures show a decrease of 3.1%, indicating a greater drop than expected as we moved from April to May.

“With the exception of the West Coast, median prices in the regions have come off their peak. Auckland was the only region to see an annual decrease in median price — down 2.2% on the same period last year. The region has seen a significant shift in market dynamics, with the median price across the Auckland region decreasing 13.5% since its peak of $1,300,000 in November 2021. In the six months prior, median property prices had increased 13.0%.

“A similar story can be seen in other regions. However, a few are bucking the trend. The West Coast, which saw an annual increase in median prices of 30.8% from May last year, has had a 12.9% increase in median prices since November 2021, off the back of a 15.9% increase over the six months prior. Otago has seen a 4.4% increase since November 2021, following a 7.5% increase in the six months prior.

“Over the course of 2021, house prices soared, largely due to supply not being able to meet demand, supported by historically low interest rates and access to capital. Measures introduced by the Government — including the reintroduction of LVRs and changes to the Credit Contracts and Consumer Finance Act (CCCFA) — and the Reserve Bank OCR hikes have affected market dynamics, and we are now seeing the reverse playout. The price growth of last year is receding.

“With further increases to interest rates to counter inflation expected and global economic uncertainty and supply chain disruption caused by the conflict in Ukraine, we may see market activity settle this winter at its new, slightly slower, pace.

“Real estate professionals across the country note potential buyers are taking their time to make decisions, have more confidence to negotiate prices, and vendors are recognising the market has changed and are adjusting their expectations to meet the market,” Baird observes.

Sales increase month-on-month

Across New Zealand, the number of residential property sales decreased annually by 28.4% in May 2022, from 7,758 in May 2021 to 5,556. Moving from April to May, there was an 11.0% uptick in sales — up from 5,006 last month.

The sales count for New Zealand excluding Auckland decreased 22.6% annually from 4,902 to 3,795. Month-on-month, this was an increase of 12.2% — up from 3,383 last month.

Nelson was the only region to see an annual increase in sales; the region was up 4.5% compared to the same time last year, from 67 to 70. All other regions saw an annual decrease in the number of sales.

Those with the greatest annual percentage decrease were:

• West Coast, which decreased 52.5% annually from 61 to 29; the lowest sales count for a May month since 2015 (inc. May 2020)
• Auckland, which decreased 38.3% annually from 2,856 to 1,761; the lowest sales count for a May month since 2008 (excl. May 2020)
• Waikato, which decreased 31.5% annually from 744 to 510; the lowest sales count for a May month since 2011 (excl. May 2020)
• Bay of Plenty, which decreased 31.5% annually from 463 to 317; the lowest sales count for a May month since 2010 (excl. May 2020).

Wellington had its lowest sales count for a May month, including lockdown affected May 2020. The region saw a 29.7% decrease annually — from 735 to 517.

“While annual sales counts are down across the country, moving from April to May, there was an uptick in sales activity. The New Zealand sales count was up 11.0% month-on-month, a smaller increase than we expect to see moving from April to May, based on the seasonally adjusted figure of -3.4%.

“Access to finance, interest rates, and inflation are primary concerns for buyers. December changes to the CCCFA had a major effect on people’s perception of their ability to enter the market. Now, as the pace of the market and price growth continue slow, there is a fear of overpaying, and buyers are stepping back to see what happens in the market over the coming months.

“The drop in sales count is partly due to the reduction in competition — the result of increased stock levels, growing listings and fewer buyers, particularly first home buyers and investors. The Government’s May Budget announcement was welcome news for first home buyers, bringing increases to the cap on the price of property eligible for a First Home Grant to align with lower quartile estimated values for new and existing properties and the removal of caps for First Home Loans.

“With much more choice on the market now, more first home buyers have shown interest, but this has not yet transferred to sales. While it may give some first home buyers the confidence to reassess their opportunities in the market, navigating tighter lending criteria and increasing inflation, global economic uncertainty and rising interest rates will remain a challenge for some buyers,” Baird comments.

REINZ HPI showing signs of decline

The REINZ House Price Index (HPI) for New Zealand, which measures the changing value of residential property nationwide, showed an annual increase of 3.7% from 3,806 in May 2021 to 3,946 — down 7.7% from its peak in November 2021.

For New Zealand excluding Auckland, the HPI increased 5.8% annually — from 3,850 in May 2021 to 4,072 in May 2022.

There were no regional highs on the HPI this month, and Wellington saw a further decrease on the index, down 6.9% compared to May last year — from 4,063 to 3,781. Wellington has now ranked bottom two of all regions on the HPI for seven consecutive months. Auckland had the second-lowest result, seeing annual growth on the house price index of 0.6% — from 3,751 to 3,774.

Canterbury and Northland ranked top of the HPI. Canterbury has been in the top two in terms of HPI movement for eight months and, in May 2022, recorded an annual increase of 16.5% — up from 3,223 in May 2021 to 3,754. Northland has ranked second for five months, showing an annual increase of 12.9% in May 2022 — from 3,818 to 4,312.

Properties taking longer to sell

Nationwide, the median number of days to sell (DTS) a property increased 13 days year-on-year to 43. While in New Zealand excluding Auckland, it increased by 14 days to 43 — the highest median DTS since February 2019 (excluding COVID-19 lockdown-hit April and May 2020).

Only the West Coast saw an annual decrease in the median DTS — down one day to 30.

Excluding April and May 2020, May 2022 recorded the highest days to sell in:

• Gisborne since February 2019
• Hawke’s Bay since May 2015
• Manawatu/Whanganui since Aug 2015
• Southland since January 2019
• Wellington since June 2011.

Inventory levels continue to creep up

In May 2022, the total number of properties available for sale nationally increased 77.6%, from 14,883 in May 2021 to 26,435. For New Zealand excluding Auckland, inventory increased 93.7%, from 8,155 to 15,799.

All regions bar the West Coast (+18.9%) had an annual increase in inventory levels of 40% or more, while six regions saw inventory more than double compared to the same period last year.

For six months, Wellington and Manawatu/Whanganui have had over twice the inventory they recorded in the same month the year prior — up 187.9% and 140.0%, respectively, in May 2022 compared to May 2021. In addition, Hawke’s Bay increased 148.4%, Bay of Plenty was up 147.7%, Nelson saw inventory rise by 113.6%, and Waikato by 109.5% compared to May 2021.

When we look at listings, Nelson, Northland and Bay of Plenty all have over 20% more listings than one year prior. Listings in Gisborne were down 27.9% compared to May last year — the fourth month listings have been less than the year prior. In Southland, listings were down 15.1% compared to May last year — the fifth consecutive month listings have been less than the year prior.

“We continue to see an increase in homes available for sale, with a national annual increase of 77.6% in May. This upward trend in supply coincides with a quieter market, squeezed by tightened lending criteria, where properties are staying on the market for longer — the median days to sell across New Zealand sitting at 43.

“There are several factors at play. There is more property for sale on the market, giving buyers welcome choice and more time to find the right property for their stage in life and undertake their due diligence. At the same time, financing criteria and an increase in conditional sales and negotiations result in a longer transaction process.

“It’s self-fulfilling; more supply, more choice, less urgency, slower sales. The impact is that there is less upward pressure on prices,” Baird adds.

Inventory and listings data come from realestate.co.nz.

Percentage of sales by auction down

In May 2022, 606 properties were sold by auction across New Zealand, representing 10.9% of overall sales compared to 28.2% this time last year. In April, the percentage of sales by auction was 14.6%.

For New Zealand excluding Auckland, 7.8% of properties were sold by auction in May 2022 compared to 18.7% in May 2021.

Gisborne had the highest percentage of sales by auction at 23.4% (11), though down from 50.0% at the same time last year (29). Canterbury had the second highest percentage of sales by auction at 17.7% (160).

In Auckland, the percentage of sales by auction was 17.6% in May 2022 — down from 44.5% the year prior.

“The supply-demand balance has shifted, and the market has hit a slower pace. In a more moderate market, there is usually a move away from auctions and an increase in properties listed with prices. With an increase in buyers who cannot buy unconditional — who require finance and other conditions — some sellers are reluctant to go to auction. Agents are reporting an increase in the number of sales made in the few days after an auction to a conditional buyer.

“While on-the-day auction clearance rates have fallen, we continue to see serious buyers attend. Auctions are a transparent way to evaluate the market value of a property, and while a home may not sell on the day, they generate interest and open the sale up for conditional buyers.

“Real estate professionals understand the market, nationally and locally, and can assess comparable properties in your area to establish the right price and sales method,” Baird concludes.

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