Source: Cotality
New Zealand’s housing market remains stuck in a haze, with property sales falling for an eighth consecutive month in August as rising borrowing costs and ongoing economic uncertainty continue to dampen confidence.
Cotality’s Chart of the Month in the September Housing Chart Pack highlights a growing divide between buyer groups, with first home buyers increasing their market share while existing owners remain subdued.
That contrast is becoming a defining feature of the current market. While affordability has improved significantly over recent years, many existing homeowners remain cautious about moving, contributing to weak sales activity despite improved conditions for some buyers.
Cotality Chief Property Economist Kelvin Davidson said recent increases in borrowing costs have created a fresh challenge for a market already struggling to gain momentum.
“First home buyers remain a key presence in the property market, accounting for a combined 29.1% of purchases across July and August, hovering at record highs,” he said
“At the same time, movers remain relatively subdued, which is one reason why sales activity remains weak even though affordability has improved.”
Elevated listing levels continue to give buyers significant leverage across much of the market.
“This high level of choice is giving buyers a lot of the pricing power,” Mr Davidson said.
However, he noted the current slowdown differs from some previous downturns because most vendors are not facing significant financial pressure.
“Most vendors won’t be in a forced-selling position, so prices aren’t collapsing,” he said.
That balance of power continues to keep property values subdued without triggering a sharp fall.
“In this buyer-friendly market, property values remain subdued,” Mr Davidson said.
“The Cotality Home Value Index dipped by another -0.4% in August, with Auckland and Wellington still sluggish, but Christchurch more resilient.”
Looking ahead, Mr Davidson said the labour market could prove critical to determining when activity recovers.
“All in all, the housing market remains subdued and it’s difficult to see what changes this holding pattern in the near term,” he said.
“The labour market may hold the key. Rising employment and better job security may be required before we could expect any kind of growth in property values – although some investors will be buoyed by Labour’s announcement that they’ll keep interest deductibility.”
“Of course, this weak patch has seen affordability improve significantly, so there are always two sides to the coin.”