Rising sales, fewer homes on the market signal property market downturn nearing end

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The number of houses sold in May rose 7.5 percent compared to the same time last year.
Photo: RNZ / Marika Khabazi

The end of the property market downturn appears to be in sight, house sales recording their first annual increase in two years.

New data from property research firm CoreLogic showed the number of houses sold in May rose 7.5 percent compared to the same time last year.

It was the first yearly increase in home sales since 2021.

However there were fewer homes for sale, with new listings over the month ending early June down 28 percent year-on-year, 20 percent below the previous five-year average.

Chief property economist Kelvin Davidson said with consecutive interest rate hikes and tighter lending rules, the market appeared to be reaching a trough.

“While it’s probably too early to emphatically call it a new trend, it is now looking more certain that sales volumes have finally bottomed out,” he said.

“As the flow of new listings remains low against a backdrop of rising sales, we are starting to see a tightening of stock on the market, which in turn may start to contribute to competitive price pressures.

“Available listings are about 5 percent lower than this time last year, with stock tightening in key regions such as Auckland, Bay of Plenty, and Wellington.”

Davidson said factors including the broad peak of mortgage rates and strong labour market should underpin some growth later in the year.

“The end of the downturn doesn’t suddenly mean the start of an upturn, however.

“After all, housing affordability is still stretched, and caps on debt to income ratios loom large in 2024.”

Stock levels trending down in capital

Tommy’s Real Estate sales director Tim Clark said it was an interesting market in Wellington.

“At Tommy’s… for the last three months we’ve actually sold more in 2023 than we did in 2022. Now, that’s by volume, so that’s transactions.”

Because there were a number of buyers reentering the market, Clark said they were starting to see some competition.

“For example, a few of our tenders yesterday were actually under multi offer and what that will do is put a bit of pressure back on price. But generally, the stock levels are trending down a wee bit.”

Clark said prices were near or at the bottom of a drop.

‘One of the harder ones’

Barfoot and Thompson managing director Peter Thompson, based in Auckland, said it was “just a typical ‘nother cycle”.

“Certainly it has been one of the harder ones that we’ve been through in 42 years I’ve been in real estate, I’d say it would be the second hardest subject to the ’87 share crash, I think that was the worst one that we experienced.”

Thompson said he was seeing similar signs to what Clark was seeing in Wellington.

“There are positive signs that we’re towards the end of the bottom of that cycle.”

First-home buyers were making up about 25 to 30 percent of sales, he said.

“The investors are still holding off.”