New Zealand’s average property values have increased for a third consecutive month as the market continues to bounce back, according to CoreLogic.

The latest figures from the CoreLogic House Price Index, released today, show a 1.0% increase in December.

It comes after property values increased 0.4% in October, and 0.7% in November — the strongest monthly gain since January 2022 (2.1%).

The average value has risen to $924,489 — up 2.1% over the past three months since September’s cyclical trough.

However, national property values still remain 3.3% below the same time last year, and 11.4% lower than the peak from two years ago.

The gains were widespread across the main centres last month, with Tauranga, Auckland and Christchurch all recording increases of more than 1%.

CoreLogic NZ chief property economist Kelvin Davidson said the continued gains were unsurprising but he anticipated a “a degree of continued “patchiness” in 2024, both in the changes from month-to-month, as well as variability across the regional markets.

“A further rise in property values in December seemed almost inevitable given housing market sentiment has risen in recent months. This is off the back of several factors including the change of government, a peak — and even some falls — in mortgage rates, continued growth in employment, and soaring net migration,” Davidson said.

Despite the more positive outlook, he was doubtful that “too many people are rushing out and buying property just because the recent downturn has suddenly made it look cheap”.

“Affordability pressures are still a major issue. Even though mortgage rates have dropped a bit for some durations, the most popular shorter fixed terms, such as one year, have been flatter at a high level. This is continuing to strain aspiring homeowners’ ability to buy property.”

Davidson said caps on debt to income ratios are another factor to consider.

“Sharper or more widespread falls in mortgage rates than the Reserve Bank would be comfortable with could perhaps bring forward the timing for those DTI restrictions, provided the banking processes are in place,” he said.

“As such, although the general upwards trend for property prices is likely to continue in 2024, it may not be smooth from month-to-month, with some results stronger, but others much weaker. Underlying that patchy national picture would be variability at the regional level too, with the main centres potentially seeing the biggest boost from inwards migration, but provincial markets less supported.”

Queenstown defies downturn

Property value results for the regions are a strong indicator the market upturn “could be variable” in 2024, Davidson said.

Gisborne showed a 2.5% monthly fall despite a 0.4% rise since September, with Napier also down in December. By contrast, Whanganui, Rotorua, and Queenstown all rose by 2% or more.

However, on a year-by-year basis, Queenstown has continued to largely defy the downturn, with values now almost 6% higher than a year ago, and sitting at a new peak of around $1.77 million.

“Clearly, Queenstown is a still a magnet for wealthy buyers, whether local or from out of town. And strong demand to live and work in the area as tourism snaps back is seemingly contributing to price pressures as well,” he said.

Property market outlook

While December “brought 2023 to a close on a strong note for property values”, the year ahead may not reach prospective homeowners’ expectations, Davidson said.

“I suspect that the likely recovery over the year ahead could undershoot some expectations, and prove to be a little underwhelming by past upswings,” he said.

“A lot hinges on how mortgage rates move but also how any falls are counteracted by tighter lending restrictions from the Reserve Bank, such as debt-to-income ratios.”

Davidson said it pays to be “mindful of the role of psychology in the housing market, and the scope for sentiment to overtake the fundamentals”.

“Certainly, investors’ moods seem to have perked up lately off the back of the change of government. But with significant cashflow top-ups out of other income still required on a typical investment property purchase, that positive mood may not translate into much extra buying.”

He anticipated sales activity to rise “by about 10% this year, which is reasonable growth, but from a low base”.

“Meanwhile, national property values could rise by about 5%, averaging out a wider range of regional results.”