Soggy Start To 2023 For Much Of Aotearoa's Beleaguered Residential Property Market

Extreme weather events across the top of the North Island have done less than nothing to halt a slow decline that has seen home values reduce nationally by an average of 1.1% in January.

Quotable Value (QV) Chief Operating Officer David Nagel said home values in flood-stricken parts of Northland, Auckland, and Bay of Plenty were likely to recover “fairly quickly” generally – as we saw in Nelson following another extreme weather event last year – but the record amount of rainfall has been yet another obstacle for potential buyers and sellers to deal with at a time when house sales are already at an historic low.

“It’s hard enough that people are already grappling with rising interest rates, inflation, and a still increasing cost of living. Now many people in the upper North Island have been having to deal with cleaning up after some pretty extreme weather. It’s little wonder that it’s been a slow start to the year for the residential property market – I’d suggest it’s probably going to stay that way for a while yet.”

Otherwise he said the new year had started more or less how the old one ended – with widespread home value reductions across much of Aotearoa. The latest QV House Price Index figures for January show the national average home value fell by 1.7% this quarter to $934,761, which is 0.5% worse than QV’s December quarter figures. None of the country’s main urban centres were immune this quarter – not even Queenstown, which experienced its first quarterly decline since August 2020.

Home values continue to slip away fastest around the bottom half of the North Island. Palmerston North and Hastings posted the largest reductions on average this quarter at 3.3% and 3% respectively. The Wellington Region also showed significant declines this quarter with an average home value reduction of 2.8%, and continues to top the list of average negative home value growth annually at 20.4% – well above a national average annual decline that now stands at 12.1%.

“Has the property market started 2023 how it will go on? Only time will tell for certain, but it certainly looks as though the market hasn’t hit bottom yet. As a result, it seems many prospective buyers are being very cautious right now, waiting to see exactly how far prices will fall. Others are finding it too difficult to obtain finance, or are unwilling to make such a commitment given the very high level of economic uncertainty right now,” Mr Nagel said.

“So it looks as though this summer will probably continue to be a relatively quiet one for the residential property market for the time being at least, especially by recent standards. I certainly hope it’s at least a sunnier one than it has been so far for many of us.”

Auckland

It has certainly been a damp start to 2023 for Auckland, with extreme wet weather events doing nothing to help a property market that has been in steady decline since about the same time last year.

The average home value dropped across the region by 1.4% in January to $1,320,813. That figure is 14.3% lower than the same time last year, with Papakura (-5.8%), Franklin (-5%) and the North Shore (-2.4%) posting the biggest declines this quarter. Waitakere (-2.2%), Manukau (-1.9%), Auckland city (-1.4%) and Rodney (-1.4%) weren’t far behind.

Local QV valuer Hugh Robson commented: “Real estate agents have been reporting a quiet market overall, with mixed buyer interest depending on factors such as character, location, whether the property has been renovated, and so on. It is too early to say whether there will be much impact from the recent flooding.”

Meanwhile, he said demand for development land continued to drop off significantly from recent highs, with many development sites around the region sitting vacant or attracting little interest from prospective buyers.

“Developers are playing a waiting game, waiting to see what happens with interest rates, buyer activity, sale prices and the up-coming election. There are still many multi-unit developments under construction, of course, but these are developments that have been ‘in the pipeline’ for a while and the developers have no option but to complete them.”

Northland

Like Auckland, Northland has endured an especially wet start to 2023 – but unlike its southern neighbour, it is showing some pockets of home value growth to start the year.

The average home value increased by 1.3% to $751,413 this quarter in the Far North District, and by 1.7% to $888,086 in Kaipara. Meanwhile, Whanagrei’s average home value has dropped 1.8% since the start of November last year to $773,525 in QV’s latest figures.

Tauranga

Has the residential property market started as it means to go on in 2023?

Tauranga has welcomed the new year with a 2.1% decline in average home value for the month of January. The city’s average home value is now $1,054,130, which is precisely 12% lower than the same time last year.

QV property consultant Derek Turnwald commented: “Many prospective buyers are holding off making property purchases while prices continue to fall, so there still is a fair bit of pent up demand. Open home attendance is improving slowly – this is typical in summer when the weather is typically more conducive to looking over properties, which hasn’t always been the case this time around. Auction attendance and results are also improving.”

“The next OCR announcement by the Reserve Bank is on 22 February. Inflation remains stubbornly high according to the latest update showing that consumer spending has not yet slowed, and therefore it’s likely that there will be more OCR increases, putting further downward pressure on prices,” Mr Turnwald added.

Waikato

Will the property market halt its slow decline in 2023? It has certainly been a slow summer so far in the Waikato.

Home values have fallen across the greater region by an average of 2% in the three months since the start of November 2022. That includes a small 0.6% average decline in January 2023, which is a little better than the national average of a 1.1% decline last month.

In Hamilton, the average home value has dipped 2.1% to $807,507 this quarter, which includes a 1.5% drop last month. The city’s south-eastern and north-eastern suburbs have experienced the largest declines over the past 12 months and in the most recent quarter, falling by an average of 5% and 3.2% respectively since November.

Local QV registered valuer Tom Schicker commented: “Sales volumes are significantly lower than at the same time last year, which is understandable given the major shift in market sentiment and conditions during that time. There is no sign of interest rates easing while annual inflation is still high, which continues to push up the cost of living.”

“Especially at the lower end of the market, we are seeing the higher interest rates restricting the number of eligible first-home buyers, and restrict all buyers in general,” he added.

Rotorua

Home values continue to slip away in Rotorua at an average rate of 2.3% this quarter.

Rotorua’s average residential property value was $666,304 as of 31 January 2023, which is 11.6% lower than the same time last year.

Local QV property consultant Derek Turnwald said a two-tiered market had developed within the larger Rotorua residential property market. “Demand for residential property remains subdued generally, but the market in the higher-end suburbs and lakeside properties remains reasonably strong.”

He said demand for lifestyle properties within the Rotorua District was also reported to be reasonable, with prospective buyers in the higher price brackets often being in a better financial position to be able to service higher interest rates.

However, he said it wasn’t all bad news for first-home buyers. “First-home buyers have been showing more interest in the local market lately, with open-home attendance improving over spring and early summer. Though it appears that most buyers are still waiting to see how far prices will fall.”

Taranaki

One district in the Taranaki region has managed to bunk the residential property market’s downward trend this quarter.

Stratford’s average home value has increased by 2.9% to $511,584 since the start of November last year – considerably better than the national average, which is a 1.7% average decline, and its nearest neighbours.

Meanwhile, the average home value in New Plymouth has reduced by 2.1% this quarter to $726,839, while the average home value in neighbouring South Taranaki District also decreased by 5.1% to $445,710.

Hawke’s Bay

Hawke’s Bay has kicked off 2023 more or less how 2022 ended – with the residential property downturn still in effect.

Home values fell by an average of 2.2% across the wider region this quarter. In Napier, the average home value reduced by 1.7% to $776,874, while in neighbouring Hastings it dropped by 3% to $792,015.

Local QV registered valuer Damien Hall said home values were on average 13.9% lower across the region than at the same time last year. “The Hawkes Bay market remains fairly quiet with mixed results across the board. We’re seeing extended listing periods with minimal offers coming to the table, many of them unrealistic – even in this market,” he said.

“Some agents are reporting an increase in activity at open homes, but sale numbers remain low generally. Auction success rates are also low with a number of properties being passed up at auction. There seems to be a continued trend of sales influencing further sales, creating a domino effect. We’re seeing cases of sales falling through because of this.”

Palmerston North

Home values have dropped in Palmerston North at a faster rate on average than in any of Aotearoa’s other main urban centres this quarter.

Since the start of November last year, the average home value has reduced 3.3% to $641,307, which is almost twice the average average rate of reduction nationally. The average home value locally is now also 17.3% lower than at the same time last year.

Local QV registered valuer Olivia Betts commented: “Palmerston North’s average home value has fallen below $645,000, following 12 consecutive months of negative home value growth across the city. This decline has been fairly consistent for all property types. We expect to see the property market start to stabilise when interest rates also stabilise, but that may not be for a while yet.”

Wellington

Home values continue to slip away in the Wellington region at a faster rate than almost anywhere else in Aotearoa.

The average home value has fallen 20.4% since the same time last year, including a reduction of 2.8% this quarter. Of the country’s main urban centres, only Hastings’ and Palmerston North’s home values have fallen further since November, and nowhere has fallen further annually.

The average home value is currently $870,216 – a figure that local QV senior consultant and registered valuer Blake Ngarimu says is likely to drop further in coming weeks and months, before eventually flattening out later in the year.

“We expect to see values eventually flatten out across the Wellington region, even though the market is currently showing no signs of the decline in the market easing, following yet another month of negative value movement. Asking prices on properties that have been sitting on the market for extended periods of time continue to reduce, but open home attendance has increased slightly, with cheeky offers below asking price now the norm as buyers try to secure bargains.”

Nelson

It has been a relatively quiet start to the year for Nelson’s residential property market.

The average home value has fallen by 1.1% to $801,902 from 1 November 2022 to 31 January 2023. That figure is now also 9.2% lower than at the same time last year, with further reductions likely in the coming weeks and months.

QV Nelson/Marlborough manager Craig Russell said properties were increasingly taking longer to sell, with numerous listings having price reductions. “Local buyers are being much more selective than they have in recent years, so real estate agents are having to actively manage vendors' sale price expectations in order to generate sales.”

“The number of properties available on the market is steadily increasing and is now significantly higher than this time last year. There also appears to be an oversupply of vacant sections, with discounting continuing when sites have failed to attract interest after a few months on the market.”

West Coast

Home values are up across the West Coast region this quarter.

From 1 November 2022 to 31 January 2023, home values have increased by an average of 2.8% in Grey, 6.3% in Westland, and 9.4% in Buller. The average home value in these three West Coast districts is now $378,604, $422,515, and $356,284 respectively.

QV West Coast manager David Shaw reiterated that local West Coast housing data was prone to fluctuation given the lower-than-usual residential sales volumes, but he said the local residential property market was undoubtedly looking relatively rosy compared to much of the rest of the country.

“I think the main thing driving the market is that the West Coast has been discovered as a great place to live and is very affordable by national standards. We’ve had great summer weather with a high number of both national and international visitors. Local tourism statistics indicate that spending is close to pre-pandemic levels, which is great for the local economy,” he said.

“Local real estate agents were reporting less enquiries in late 2022, but since the new year demand has been solid again with sales increasing. Affordability continues to be the main driver in the market with a high percentage of purchasers being from outside the region.”

Canterbury

It has been a relatively quiet summer so far in Canterbury, with just two districts across the wider region showing home value growth this quarter.

From 1 November 2022 to 31 January 2023, just Ashburton (1.1%) and Timaru (0.9%) have experienced positive home value growth on average. Home values across all other Canterbury districts have reduced at an average rate of 1%.

In Christchurch, the average home value has fallen 1.3% to $749,097 this quarter, including a relatively small reduction by national standards of 0.3% last month.

Local QV registered valuer Olivia Brownie said the Canterbury region had largely begun 2023 with a continuation from 2022. “Once again we’re seeing a mixed rate of decline in the region, yet overall it has been slow and minimal. Sales numbers are down, but that is to be expected over the summer holidays. Listing numbers are still increasing which will continue to put downward pressure on values.”

Miss Brownie said she expected to see buyer activity pick up over the next few months, as it typically does at this time of year. “We also expect to see quality homes maintain their values, yet possibly more pressure will be put on other parts of the property market due to current economic factors.”

Dunedin

Dunedin is on par with the rest of the country this quarter.

From 1 November 2022 to 31 January 2023, home values across the city have reduced by an average of 1.7% – precisely the same quarterly rate of home value reduction as the national average.

At $639,257, the average home value in Dunedin is now 11.6% lower than at the same time last year, and already 0.7% less than at the start of this year.

Local QV registered valuer Rebecca Johnston commented: “Market activity through the first months of summer continues to be subdued and sale prices continue to soften as buyers remain hesitant. This softening is even more so for properties requiring maintenance and upgrades, which are also viewed less favourably by lenders. Where immediate maintenance is due, vendors are having to come to the party to achieve a sale.”

“There remains minimal movement in land, though well located sections including on the Taieri and elevated ones with coastal outlook appear to have minimal reductions in value,” she added.

Queenstown

Has New Zealand’s residential property downturn finally caught up with Queenstown?

Home values have fallen in Queenstown by an average of 0.7% this quarter, which is less than the average rate of reduction nationally (-1.7%), but is statistically significant because it is the first time the town’s quarterly rate of home value growth has fallen into negative territory since August 2020.

Until now, Queenstown has regularly been the only main urban centre to consistently post positive quarterly home value growth. In October, November and December its rolling three-month average growth rate was 2.9%, 1%, and 1.3% respectively.

Invercargill

Home values all but broke even in Invercargill this quarter.

New Zealand’s southernmost city has experienced a small decline in average home value of 0.2% throughout the three months to the end of January 2023. That makes it the country’s best-performing urban centre this quarter.

The average value of a home here is currently $472,420, which is 3.7% less than the same time last year.

Local QV registered valuer Andrew Ronald commented: “There is still much less demand now compared to early 2022. This is particularly evident for entry-level housing where there are now limited investors and fewer first-home buyers looking to purchase. This is due to difficulties in obtaining suitable finance, rising interest rates, and the increasing cost of living.”

Provincial centres

It’s an all-West Coast top three this month, with Buller (8.4%), Grey (3.8%) and Westland (2.8%) experiencing the most home value growth on average throughout the past six months.

At the other end of the spectrum, Rangitikei (-13.7%), South Wairarapa (-12%), and Masterton (-10.9%) round out the top three provincial centres with the largest home value drops on average for this six-month period.

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