House values in June saw their biggest month-on-month drop in 12 months, according to CoreLogic economists — saying a raft of fresh Government policy changes are “unlikely to shift the subdued housing market”.
CoreLogic’s House Price Index fell 0.5% in June, taking the quarterly change to negative 0.8% The month-on-month decline was the largest drop in prices since June last year, and continues a trend of minor falls seen in recent months.
Each of the main centres recorded flat to falling prices over the month — with the best performers, Christchurch and Dunedin, experiencing no change in June.
CoreLogic research head Nick Goodall said the last 12 months were a dead cat bounce, with confidence perhaps misjudging the trajectory for mortgage interest rates.
“Inflation has remained sticky, particularly domestically, as the Reserve Bank has stayed true to their commitment of using monetary policy to bring consumer prices under control,” he said in a media release.
“It looks although interest rates could stay higher for longer, restricting borrower numbers and lending amounts.”
Few urban centres experiencing growth
Across urban areas, there are few experiencing real growth, with the likes of Invercargill, 2.1%, and Queenstown, 1.2%, bucking the broad trend of flat or declining values.
In June, Auckland’s negative turn was prolonged, down 1.2% over the month, and takes the quarterly fall to 2.6% – the largest quarterly drop in prices since August last year.
Meanwhile, Wellington was defined by mixed results, with weaker growth emerging in Wellington City and the Hutt, but value growth in both Porirua and the Kāpiti Coast.
Goodall said: “The variability of the market is seen with Invercargill as the most affordable urban area with an average value of $483,000, while Queenstown is the priciest at $1,820,000.
“Affordability challenges exist all around the country, while some of the smaller centres may also suffer from net-negative migration swings as young people head offshore for the promise of greater opportunities or simply an overseas experience.”
Regulatory changes unlikely to revive market
The Government’s changes are unlikely to have a “significant impact” on the housing market, according to CoreLogic analysts.
“Mortgage holders should continue to prepare for similar levels of interest rates for the rest of the year, and homeowners for the market upturn to underwhelm, especially with job security now declining,” Nick Goodall said.
“The shortening of the bright-line test to two years could see a further lift in already high listings levels, while the loosening of loan-to-value ratio policies is unlikely to see a flood of now-eligible buyers emerge.
Community providers are struggling to find homes for those living on the street.
Meanwhile, the formalised debt-to-income ratio limits are effectively “non-binding while overall lending is contained by high interest rates,” he said.
“For that reason, a firm focus remains on the Reserve Bank’s next meeting in mid-July. Recent adjustments to inflation expectations easing is promising, but the bank is likely wanting to see firm evidence before truly debating a cut to the official cash rate (OCR).
“On the flipside, there’s little to suggest the OCR could be increased, with the economy barely recovering from the recent double-dip recession. The decision should be a quick and easy one from the Reserve Bank to keep the cash rate on hold.”
