Rent made the biggest contribution to the annual inflation rate, Statistics NZ figures out this week show.
The CPI rose 2.2% in the December 2024 quarter compared to the December 2023 quarter. Almost one-fifth of that increase was due to higher rent, up 4.2%.
Other factors were higher airfares and second-hand cars, offsetting cheaper food and petrol.
This CPI increase was close to economists' expectations and slightly higher than the Reserve Bank’s forecast of 2.1%. Despite this, economists expect the RBNZ to proceed with a 50-basis point cut to the OCR in February, as non-tradable inflation (mainly domestic factors) slowed more than expected. The CPI also rose by 0.5% in the December quarter compared to the September quarter.
Auckland Capital Valuations delayed another 4 months (Source)
Auckland homeowners will be waiting at least another four months for updated Capital Valuations (CVs) from Auckland Council.
CVs, originally due in October last year, were delayed by the Valuer-General, who asked the council to amend some of its data. This is now expected to be completed by May.
The delay may be influenced by the aftermath of the Auckland Anniversary Weekend floods in January 2023, which led to insurance claims that exceeded CVs, highlighting discrepancies between CVs and actual market value.
CoreLogic says it’s unlikely that CVs, which set the property value every three years to help set local rates, would change much in three years.
Some experts argue New Zealanders focus too much on CVs compared to places like Australia, where agents are required to give buyers a clear price indication. In Auckland, many homes are currently selling for less than their 2021 CVs, raising concerns about whether the new CVs will reinforce outdated prices or reflect a decline.
Our view: CVs make for a poor measure of what a property is actually worth. Using market data and keeping pace with what similar properties are selling for in your area will provide a better measure and is usually what your real estate agent provides when you engage with them.
Property listings hit $115 billion, as prices continue to ebb (Source)
New Zealanders listed more than $115 billion worth of residential property for sale last year, according to realestate.co.nz – the country’s biggest listing site.
It reports more than 110,000 new listings in 2024, up 19,000 on the year earlier, but with only about 70,000 sales completed, the data reveals a slower pace of sales.
The average asking price of $892,579 was largely stagnant year-on-year. Sales increased across the country, with Wellington out front with a 37.3% increase in homes on the market, followed by Wairarapa (26.5%) and Hawkes Bay (25.8%).
With generally softer prices across most regions, the country’s most expensive region, Central Otago Lakes, saw its asking prices (up 7% to an average of $1.57 million) widen the gap with the rest of the country. Auckland’s asking prices fell slightly to an average of $1.1 million.
Our view: There are currently high levels of housing stock. This is not unexpected given we have faced high interest rates for quite some time, so diving into getting a mortgage perhaps wasn't so appealing for people. As we see the OCR trend downwards and banks lowering mortgage rates, buying activity should pick up. However, buyers now have a lot of properties to choose from so until we reach that tipping point where there are more buyers in the market and the stock levels reduce, buyers will hold the upper hand.
Buyers have more power in 'deep' property downturn, new figures show (Source)
New Zealand's housing market has experienced a "deep and prolonged" downturn, giving buyers more leverage, according to property research firms.
Real Estate Institute (REINZ) data shows a 27.4% drop in sales in December compared to November, though there was a slight 1.8% increase year-on-year. The national median price fell by 0.6% to $775,000, and the house price index declined by 1.1% year-on-year.
REINZ notes December was a quiet month, with many buyers lacking urgency and taking holidays, leading to an oversupply of around 30,000 homes for sale. This high inventory has kept prices down despite lower interest rates, and there is less demand compared to previous years. However, REINZ CEO Jen Baird suggests the market could see a gradual improvement in sales as confidence in the economy and interest rates grow.
CoreLogic data reveals house prices have dropped by nearly 18% since their post-Covid peak, with the biggest declines in Wellington and Auckland, where prices fell by 25% and 22%, respectively. Christchurch saw a smaller decline of 7%. Despite some recent mild increases in sales volumes, listings remain high, giving buyers significant pricing power. The increased availability of listings, particularly in major cities, has kept price pressures in check, which is challenging for homeowners who bought at peak prices, but favorable for recent buyers.
Our view: The property market is often slow over the holiday period. We have another OCR review on 19 February to look forward to, and the banks have already lowered interest rates this year with reports being there are more to follow. Lower mortgage rates should bring more buyers into the market, increasing competition for properties, and in turn, prices should start to rise.
Do they go below 3.5%? - pressure builds for bigger mortgage rate cuts (Source)
With inflation holding steady at 2.2%, there are unlikely to be surprises at next month’s OCR announcement, when a 50-basis-point cut is expected. This marks the second consecutive quarter inflation has stayed within the RBNZ’s target. Banks have already begun lowering interest rates, and economists like Kiwibank’s Jarrod Kerr suggest the latest inflation figures, slightly above the expected 2.1%, do not alter the overall forecast.
Sydney, Melbourne home prices fall, listings pile up amid falling demand (Source)
In some parts of Sydney and Melbourne, the volume of residential listings has surged (by more than 50% on last year) as sellers rush to beat the competition in a falling market, made worse by unsold properties from spring 2024. CoreLogic data shows in the four weeks leading up to January 19, 16,579 properties were listed in Sydney, a 6.7% increase from the previous year and 8.2% above the five-year average. In Melbourne, 22,886 homes were listed, up 1.1% from last year and 7.3% above the five-year average.
While this period is typically slow in terms of demand, CoreLogic suggests the trend goes beyond seasonality. Fewer buyers and more sellers entering the market suggests rising mortgage stress and further drops in home values are anticipated, as sellers may be forced to reduce prices to secure sales.
Have a wonderful weekend everyone.
From the team at Erskine Owen.
