Slow Recovery To Be Continued In 2024

The housing market continues to strengthen into the festive season – but a slow recovery throughout 2024 is expected.

The national average home value is now precisely 3.3% lower than at the start of 2023, compared to an average reduction of 10.2% from 1 January to 30 November 2022, an average 25.5% increase over the same period in 2021, and 10.8% growth in 2020.

The latest QV House Price Index shows the average home increased in value by 2.3% over the three months to the end of November – a small rise on the 2.1% quarterly home value increase reported at the end of October – with the national average now sitting at $914,017. It follows four consecutive months of modest growth, including 0.7% last month.

Quotable Value (QV) operations manager James Wilson commented: “The residential property market has been a rollercoaster ride since Covid-19 first reared its ugly head on these shores, with more ups and downs than the entire decade prior. This year, home values continued to fall for the most part, stabilised, and now appear to be slowly beginning to strengthen once again.

“But rather than the start of another major uplift in values, I expect we’ll see a return to a more ‘typical’ sort of housing market in the year ahead, with slow growth, and days to sell and listing numbers eventually returning to historic norms. This is not a bad thing given some of the economic challenges we all continue to face together as a country.”

“High interest rates currently have a stranglehold on the market and the economy as a whole, which won’t alleviate any time soon judging by the Reserve Bank’s most recent announcement. This is going to continue to put a damper on things next year, as it's been designed to,” Mr Wilson added.

Just three of the 16 main urban centres QV monitors have recorded net-positive home value growth so far this calendar year – Rotorua (3.2%), Queenstown (2.1%) and Invercargill (1.5%) – with Christchurch (-1.2%), Hastings (-1.3%), and Palmerston North (-1.4%) tracking relatively closely behind. Whangarei (-7.4%) and Tauranga (-6.3%) have recorded the largest reductions in 2023.

However, just two urban centres have recorded modest home value reductions in the most recent quarter – Tauranga (-0.1%) and Marlborough (-0.3%) – with home values continuing to grow at a steady rate in Wellington (3.2%) despite increasing uncertainty around job security within the public sector.

“It’s really tough out there and it could get tougher. It’s just a slow but steady recovery at this stage. With the summer selling season now firmly underway, we’re seeing a small uptick in activity and listings. Increased immigration into New Zealand is also helping to fuel demand and placing increasing pressure on an already extremely tight rental market,” Mr Wilson said.

“First-home buyers continue to be the most active group in the housing market today, but it will be interesting to see if significant numbers of investors do return to the market in the first half of 2024, given the new government’s policy settings. They’ll be hamstrung by affordability constraints just like everyone else, as the mortgage pain looks set to continue in 2024.”

Northland

Home values went up by an average of 1.7% this quarter in Northland.

The average value increased 1.5% to $695,023 in the Far North District, and by 1.1% to $732,083 in Whangarei. In Kaipara, values increased by a robust 4.4% to reach a new average of $845,887.

However, values are still 6.2% lower on average across the wider region than they were at the start of this calendar year.

Auckland

It has been a mixed year for the Super City’s residential property market.

Auckland’s average home value increased by 0.8% to $1,287,201 in November, which marked its fifth consecutive month of growth. However, values remain 3.9% lower on average than at the start of this calendar year.

All of Auckland's seven former territorial authorities were in the red this quarter, with Papakura and Auckland City leading the way on 3.6% and 3% respectively. Rodney recorded the smallest amount of growth on average at just 1.2% throughout the three months to the end of November.

“The Auckland residential market continued its recovery during November, with the average home value rising 0.8%,” QV registered valuer Hugh Robson said. “While this is not a huge amount, it is proving to be a steady recovery at this stage.”

“Sales volumes have increased over the past 4-6 weeks, but again just steadily. The number of listings has increased as well particularly on the North Shore with agents reporting an increased level of enquiry and more people at open homes and auctions.”

However, he said high interest rates remained a concern, with many prospective purchasers having to wait for them to decline. “There has been some increased enquiry from investors, but many are waiting for interest deductibility rules to change,” he added.

Tauranga

Home values have fallen by an average of 6.3% so far this year in Tauranga.

The city’s average home value also reduced by 0.1% to $1,008,788 in the November quarter, after having previously experienced growth of 1.1% in the October quarter.

QV registered valuer Meghan Crowe commented: “Local real estate agents are reporting more properties coming to the market, with listing activity increasing in most areas across Tauranga in November compared to October, and the sales count also lifting slightly.”

“The market has been impacted over 2023 by a wide range of factors, including inflation and interest rate increases, adverse weather conditions, and overseas events. But Tauranga’s population is continuing to grow, which brings with it demand for new housing. This trend is likely to continue through 2024.”

Waikato

The residential property market has experienced an up-and-down year in the Waikato.

Home values have increased by an average of 1% this quarter across the wider Waikato region, but remain 4.6% lower than at the start of the 2023 calendar year. The largest reductions this year have occurred in Thames-Coromandel (-10.1%) and Waitomo (-7.8%).

In Hamilton, the average home value is now 4.5% less than it was at the start of the year, despite modest growth of 1.2% for the quarter. The average home value is now $782,799.

QV property consultant Marshall Wu commented: “The housing market started this year where it left off in 2022. In time, the overall decrease in values became less significant, and now it looks like this downturn has reached a turning point. The cash rate stands out as a crucial factor contributing to the noticeable easing in value falls, as it may now be approaching a ceiling.

“With the warmer weather now upon us, we’re seeing a clear increase in listings and a growing consensus amongst purchasers adjusting to a higher borrowing cost market. Increasing international migration and demand for housing is continuing to put a floor under housing prices.”

“An expected increase in the flow of new listings coming onto the market in coming months will put that demand to the test amid further uncertainty around interest rates,” Mr Wu added.

Rotorua

Home values in Rotorua continue to fluctuate as a result of low sales volumes.

The latest QV figures show the city’s average home values increased by 9.5% this quarter. It follows a modest reduction in the September quarter, and modest growth in the October quarter.

The average home value in Rotorua is now $692,672, which is now 1.8% more than it was 12 months ago and 3.2% higher than at the start of 2023.

Taranaki

Residential property values are up across the Taranaki region this quarter.

The latest QV House Price Index shows New Plymouth’s average home value increased by 0.8% to $712,191 throughout the three months to the end of November.

Meanwhile, the average home value climbed 1.7% to $484,294 in Stratford, and by 4% to $445,427 in South Taranaki District.

Hawke’s Bay

The residential property market appears to be warming up in Napier and Hastings.

Home values in Napier and Hastings have increased by an average of 3% and 4.5% respectively this quarter, up from quarterly increases of 1.7% and 2.4% in the previous QV House Price Index.

However, the average home value in Napier is still 4.8% less than at the start of the year, and 1.3% less than at the start of the year in Hastings.

QV Hawke’s Bay manager Damian Hall commented: “The market in Hawke’s Bay is showing signs of improvement with all four council areas now showing positive growth over the past month, and the main centres of Napier and Hastings showing improvement over the past 3-6 months.

“Different sectors of the market are showing varying trends, but the overall reflection looks positive and increased growth appears to be back to sustainable levels of around 1% per month over the past few months. This is quite a turnaround from what we saw at the beginning of this year, when the market bottomed out and activity was low.”

“The reversal of interest deductibility changes could entice investors back into the market next year but high interest rates will likely continue to stifle activity overall,” Mr Hall added.

Palmerston North

Residential property values continue to slowly build again in Palmerston North.

The average home value increased by an average of 2.7% this quarter, reaching a new mean average home value of $639,198 a figure that is now just 1.4% lower than at the start of this calendar year.

“The overall statistics continue to show a slight increasing pattern since mid-2023, following a significant drop in house prices,” said local QV registered valuer Olivia Betts.

“The overall feel in the market is generally positive after the recent election. We’re seeing increased confidence as a result of stabilising interest rates and an outlook that they may begin to fall again in the next two years.”

Wellington

Wellington’s residential property market continues to strengthen into summer.

Residential property values increased across the greater Wellington region by an average of 3.2% this quarter. The average home value is now $853,287, which is 3.5% lower than at the start of this calendar year.

It’s a stark contrast to the same time last year, at which point home values had fallen by an average of 18.7% from 1 January to 30 November 2022.

Local QV senior consultant David Cornford expected Wellington’s gradual recovery to continue in 2024 “with a few speed bumps along the way”.

“Uncertainty around job security within the public sector, rising unemployment, the cost of living crisis, and high interest rates will likely prevent any strong value growth in the region over the next 12 months. Instead, I expect we’ll see a gradual and modest strengthening of the market over 2024,” he said.

“The market remains dominated by first-home buyers currently. It will be interesting to see if more investors return to the market in the first half of 2024. Given the new government and its policy settings, which are more supportive to investors, you would expect this group to start coming back to the market in increasing numbers over 2024.”

Nelson

Residential property values appear to have levelled out in Nelson.

For the second consecutive QV House Price Index, the city is showing a small amount of quarterly home value growth 0.6% in the November quarter, up slightly from the 0.4% growth reported in the October quarter. The average home value ($770,016) is now 4.6% lower than at the start of 2023.

“Although we have seen moderate reductions in home values throughout 2023, property values have now stabilised across the ‘Top of the South’,” said QV Nelson/Marlborough manager Craig Russell.

“Activity and interest has increased in recent weeks particularly for properties under the $800,000 mark, which in part may be due to the likely re-introduction of interest deductibility and most people considering that interest rates are either at or close to their maximum levels.”

Mr Russell said buyers were continuing to show a preference for existing housing, as opposed to building new. “This is due in part to the high inflation environment we are operating in, with the cost to build being above what people are prepared to pay, and continued high financing costs.”

“Looking forward, we appear to be entering into a period of stable house prices with most people having a more optimistic view of the property market relative to 2023,” he added.

West Coast

With one month to go, the West Coast is one of just three regions across New Zealand with net positive home value growth in 2023.

The latest QV House Price Index shows West Coast property values are on average 1.5% higher than at the start of this calendar year. It includes a small 0.6% increase in average home value during the November quarter.

The average home value in Grey District reduced by 3.4% to $381,713 in the November quarter. At the same time, the average home value increased by 4.1% to $344,875 in Buller, and grew 3.3% to $434,811 in Westland.

Otago (0.7%) and Southland (1.1%) are the other two regions with positive home value growth on average in 2023.

Canterbury

Home values have fallen by an average of just 0.9% this year across the Canterbury region.

The average home value increased across the wider region by an average of 2.1% in the November quarter, up slightly on the 1.9% growth recorded during the October quarter. Waimate (-2.6%) was the only district to record an average decline throughout this period.

In Christchurch, the average home value has increased by 2% to $742,401 this quarter, which is a nominal improvement on the 1.8% quarterly growth reported in the previous QV index. The average home value is now only 1.2% lower than at the start of 2023.

Local QV registered valuer Rod Thornton commented: “While overall percentage gains on the index are very modest compared with what was occurring as the market moved towards its peak late 2021, it’s certainly a turnaround from 12 months ago when the market was slowing and there was only a general easing in values occurring.”

“The statistics bear out what we’ve seen in the market over the past three months or so with more prospective buyers creating increased demand. There has been a general lift in values across the board including in the popular entry level/first home buyer price segment. These properties tend to be selling well.”

Otago

Residential property values continue to strengthen in Dunedin as the end of the year draws near.

The city’s average home value is now $623,014, which is 3.2% lower than at the start of this year. The latest QV House Price Index data shows the average home value grew by 2.6% throughout the three months to the end of November, up from the 0.7% quarterly growth recorded in our previous index.

QV registered valuer Rebecca Johnston said local sales volumes and listings were slowly increasing. “Investors are starting to reappear back at open homes for existing builds now. They appear to be getting their eye back in the market, ahead of the new government’s changes to interest deductibility and the Brightline test.”

“While demand for vacant land continues to remain average in the medium term, developers are now looking at having to build on vacant sites to sell them,” she added.

Meanwhile, home values have also increased across the wider Otago region by an average of 2.2% this quarter.

Registered valuer Baylan Connelly said 2023 had seen a weakening market in Waitaki, particularly in the first-home buyer segment. “The cost of living and interest rates have largely made it unaffordable for most first-home buyers,” he said.

“The key driver of the residential property market this year in Waitaki has been the upper quartile, with newer housing being well sought after. Homes built within the last five years and/or modern homes that are in good condition are receiving strong interest from local families, retirees, and also people willing to relocate to the district.”

Queenstown

Queenstown’s residential property values have maintained their upward trajectory.

The average home value increased by 1.1% to $1,751,419 in the November quarter, which is again a fraction of a percentage point higher than last month’s quarterly rate of home value growth.

The average home value is now 2.1% higher than at the start of this year.

Invercargill

Invercargill’s average home value is just 1.5% higher than at the start of this year but it’s enough to rank third of Aoteroa New Zealand’s main centres for home value growth in 2023.

The QV House Price Index recorded another modest month of home value growth in the southern city, with the average residential property value increasing by 0.8% in November to $473,435. That figure has now grown by 2.7% this quarter up slightly on last month’s rate of quarterly home value growth.

Local registered valuer Andrew Ronald said November now marked the fifth month in a row that home values had increased on average in Invercargill.

“This small monthly index increase is the fifth in a row, which indicates that prices have finally stopped falling and are beginning to slowly strengthen. Despite the looming reinstatement of interest deductibility on rental properties, only a limited number of investors are active in the market today as a result of high interest rates. But there is still healthy demand from first-home buyers.”

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