Latest data suggests house prices are close to bottoming out. Sales are picking up and it’s getting progressively cheaper to fix a mortgage.
No one can call the bottom of the real estate market – or any other market for that matter – with absolute certainty. But there are signs we’re getting close or maybe even there.
Here’s a roundup of figures that suggest the worm is turning.
- OCR ‘capped’: Reserve Bank Governor Adrian Orr indicated that last month’s 25bps increase to 5.5% was as high as the official cash rate (OCR) would have to go and anticipated cuts from late next year. Recent rate rises appear to have done the job, with inflation starting to slow and forecast inflation pulled back.
- Average asking price has flattened: After peaking in January 2022, average asking prices steadily decreased. However, after a slight lift in March this year, asking prices have remained flat for the last two months, suggesting a plateau has been reached.
- Buyers and sellers changing expectations: Fewer homeowners and buyers think house prices will fall in the next 12 months. Figures published in the Trade Me Q1 Property Pulse Report show that the proportion of homeowners who think house prices will decrease in the next 12 months has fallen (Q1 2023 38% vs Q3 2022 40%). The percentage of buyers who think house prices will decrease in the next 12 months also fell (Q1 2023 47% vs Q3 2022 49%). At the same time, 55% of property seekers are thinking now is a good time to buy.
- More property pre-approvals: According to Loan Market data, pre-approvals are 18.1% higher than 12 months ago. The suggestion is that conditions are swinging in favour of sellers, particularly when the preapprovals figure is considered on the backdrop of a declining number of property appraisals compared to this time last year.
- Net migration has picked up to pre-Covid levels: Demand for housing is increasing at a time when new supply is slowing, putting upward pressure on prices.
- Investors back in? The phased-in removal of interest deductibility against rental income has blunted the appetite for investing in existing properties. Accordingly, during the first quarter of this year, 34% of settled new builds went to mortgaged investors, while only 19% of existing properties went to the same group. According to CoreLogic, this is a change from earlier years, when investors took a 28% share of both new and existing properties.
These are all positive signs. However, housing affordability is still an issue in New Zealand – it takes more than half the average income to service an average mortgage with a 20% deposit. This compares to 43% in Australia, which, by the way, has shown a stronger-than-expected lift in demand over the past two months. Over the Tasman, property prices have nudged higher and auction clearance rates are at a 12-month peak, according to CoreLogic.
Sitting on the fence? Don’t wait too long or you’ll find yourself in an entirely different market. Call 0800 GOODWINS to get an up-to-the-minute view of the Auckland market.