House prices were down 4.83% during the year to Q3 2022

New Zealand’s house prices are now falling, amidst falling demand caused by rising borrowing costs. Median house prices dropped 4.83% (inflation-adjusted) in Q3 2022 from a year earlier, in sharp contrast to a y-o-y growth of 9.96% in the previous year. It was the second consecutive quarter of y-o-y decline. On a quarterly basis, real house prices dropped 6.56% in Q3 2022. 

 

Demand is falling sharply

In November 2022, residential property sales across New Zealand plunged 36.1% y-o-y to 5,525 units, amidst the combined effects of rising interest rates, high inflation, the recent changes to the Credit Contracts and Consumer Finance Act (CCCFA) lending rules, as well as global economic and geopolitical uncertainty, according to the Real Estate Institute of New Zealand (REINZ).

Regions that saw the biggest annual decline in sales in November 2022 included Gisborne (-45.2%), Auckland (-43.5%), Manawatu/Whanganui (-39.1%), and Wellington (-36.2%).

Inventory is rising rapidly. In November 2022, the total number of properties available for sale nationally increased by a huge 47.7% to 28,449 units as compared to a year earlier. Two-thirds of the country’s regions recorded 50% or more annual increase in inventory in November 2022 as compared to the same month last year.

Rents, rental yields: Poor to moderate rental yields at 2.43% to 5.72%

Apartment costs in Auckland are around $7,209 per sq. m. 

New Zealand: city centre apartment buying price, monthly rent (2-BR apartment)
  Buying price Rate per month Yield
Auckland $421,114 $1,259 3.59%
Wellington $385,131 $1,417 4.41%
Dunedin $278,663 $1,003 4.32%
Christchurch $356,131 $1,081 3.64%

Recent news: New Zealand’s economy expanded by 5.6% in 2021 from a year earlier, marking a full recovery from the prior year’s 2.1% contraction due to the Covid-19 pandemic. The economy has been growing robustly in the past decade, registering an annual average growth of almost 3% from 2010 to 2019. The International Monetary Fund (IMF) expects the NZ economy to grow by a modest 2.3% this year.

In November 2022, the Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) further by 75 basis points to 4.25%, its ninth consecutive rate hike since October 2021 and now the highest level in almost 14 years, in an effort to rein in inflationary pressures.

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