Average house prices continue to fall but at slower rate

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Home values are likely to remain volatile for the foreseeable future, James Wilson says.
Photo: RNZ / Nate McKinnon

Average house prices are continuing to decline around the country, but at a slower rate than past months.

The average home fell 1.5 percent in the three months ended in July, a smaller rate of decline than in the recent past, according to the Quotable Value (QV) house price index.

Values fell 1.8 percent in the June quarter, 3.5 percent in the April quarter and saw a 3.4 percent decline in the May quarter.

The national average house price was $888,999. That was 10.2 percent lower less than the same time last year, but just 0.3 percent less than at the end of June.

QV operations manager James Wilson said it would not be unusual to see home values continue to yo-yo for the foreseeable future, largely as a result of reduced sales activity.

The longer term trend was a residential property market that was bottoming out after significant home value reductions over the last 18 months or so, he said.

“But it’s still early days and we’re unlikely to see the market reach a consistent bottom overnight.

“Instead, we’re likely to see significant variations in performance in sub markets across the country, as we see demand return in certain areas and for certain property types at different times. Meanwhile, that heightened level of volatility is set to continue until sales volumes increase further.”

Home values continue to diminish in Auckland (-1.5 percent) and Wellington (-1.7 percent), with the average rate of reduction increasing in Nelson (-2.4 percent), Whangārei (-1.4 percent), Queenstown (-1.3 percent), and Rotorua (-0.5 percent). In last month’s index, Queenstown and Rotorua had recorded positive growth, reflecting the heightened volatility in the market.

Four of the 16 main urban areas monitored by QV recorded small amounts of positive home value growth in the three months to the end of July – Hamilton (0.1 percent), New Plymouth (0.4 percent), Christchurch (0.8 percent), and Invercargill (0.8 percent).

First-home buyers remained most active in the market, but investors were beginning to show some renewed interest, Wilson said.

“While investors never removed themselves from the market entirely, they have adopted more cautious attitudes in recent times. Now we’re starting to see growing numbers competing for entry-level stock in areas they view as offering good value for money.”

Some property types, such as small-to-medium development sites, had taken significant hits in value since the downturn began, and since demand had dropped away were likely to keep falling, he said.

“New building consent numbers are forecast to remain suppressed throughout the year, as interest rates, build rates and overall demand continue to hamper demand,” he added.