House prices have been steadily declining nationwide throughout the first half of this year. This trend is likely to continue for now, coupled with rising interest rates and weak sentiment, coupled with affordable price growth.
However, commentators expect prices to level off over time – perhaps by mid-2023.
So where can we expect prices to rise again in the first place?
Nick Goodall, Head of Research at Corelogic, states that there are probably two factors driving every move: affordability and demand.
He said prices could rise again in areas where affordable prices are not growing relative to income.
Invercargill and Gisborne had relatively low home price-to-household income ratios of 5.4 and 6.0, respectively, at the end of the first quarter of this year, he said.
“It’s worth noting that this ratio has deteriorated from 4.4 to 36% in Gisborne over the last two years, which is higher than 34.8% in New Zealand. At Invercargill, this ratio has increased by 4.2 to 28.3%. . “
He said major urban areas where the ratio did not deteriorate significantly could be much better due to the recession, but each higher starting point also needed to be acknowledged.
“Dunedin is at the forefront of this list, with affordability down” only “23.2% at a rate of 6.9 to 8.5, followed by Nelson down 23.6% from 7.7 to 9.5.
“The future of each regional market does not depend solely on affordability, but interest rates are a key factor in allowing more people to borrow more money, which is a big factor. It will have an impact. We should also recognize the role of migration. “
If there was a period of negative migration, that is, people leaving Aotearoa, New Zealand, could lower home prices in the area than in the big cities. People tended to leave the country evenly from all regions, but immigrants to New Zealand usually came to the larger center.
“In that respect, Christchurch continues to appeal to a larger audience as affordable pressure has diminished. Christchurch’s home price-to-income ratio was 6.8, up from 4.8 two years ago,” Big. It is well below 8.1 in Wellington, the next best city in the 6’city.
“In context, in Auckland, it deteriorated 35% from 7.7 to 10.4 over the same period.”
He said Auckland’s apartment market could still grow as international students returned and the Airbnb market recovered with more tourists.
Miles Workman, an economist at ANZ, said recovery was the first to be seen where buyers valued most. In areas where home prices have typically risen sharply, there is a sharp drop, so it is not known where the dust will eventually settle. The short-term fluctuations in this cycle are quite annoying. “
He said Covid-19 would make work at home more normal, which could change the distribution of demand. Auckland’s recent construction efforts may mean that Auckland home prices will rise again more slowly than they would otherwise.
“New Zealand has made great strides towards tackling housing shortages. It is estimated that about 5,000 to 8,000 home shortages have declined quarterly since the border was closed.
“And much of that activity (and agreed future activity) is happening in Auckland … it suggests that Auckland’s housing supply is in a better position to meet demand than for a long time.
“And if everything else is equal, as the cycle changes, it limits the upward pressure on prices in the region.”
He said that given the recent decline in affordable housing prices, only the current decline in prices and the slight increase when the cycle changes would be a welcome development in terms of wealth inequality. Stated.
“But it’s important to consider the first recent homebuyers who bought near the peak and are currently declining home prices. It’s unfortunate about such an unstable home cycle. “
But real estate investor Steve Goody said Oakland was historically the first region to recover from a recession and couldn’t see any change. “Oakland has a limited amount of land, all population, and all money. It won’t be that depressed until it looks economical again.”
Economist Benje Patterson warned that the recovery is likely to be a long way off.
“It’s only been a few months down, and mortgage rates still need to be a little better when household and corporate confidence is low. I think a major part of the market will begin to stabilize by 2023 at the earliest. No, it is conditional on finding the top with mortgages and financial confidence starting to recover, “he said.
But he said the “one-way bet” on homes, which previously seemed to make money to people, is gone.
“In reality, housing is very expensive compared to our income, funding and regulation are unlikely to encourage housing as it has in the past, and attitudes are changing with the younger generation. The changing attitude of is not a bad thing. Capital that permanently bids on mediocre home prices rather than investing our cash in something that is productive and can actually earn a better income for the country. It was a pretty stupid waste of money.
“It doesn’t mean that there are no markets that are better than others, such as areas where work prospects have improved significantly, or markets that are particularly low supply and particularly desirable locations. The latter is Queenstown Lakes. That’s one of the reasons why markets like this seem to be going against the trend so far, as taps are turned on again for tourism. “