News & Research

Too soon to conclude an imminent end to the property market downturn

New Zealand’s property market downturn may have shown subtle signs of easing late last year with a final quarterly drop of -2.1% however a potential recession and more official cash rate rises on the horizon signal further falls may be on the way.

CoreLogic NZ’s Q4 Property Market & Economic Update shows the quarterly drop in home values was the smallest decline since May 2022 (-0.9%), on the back of the monthly national fall easing to -0.2% in December.

CoreLogic NZ Chief Property Economist Kelvin Davidson warned it was too soon to conclude that the easing in the housing downturn would last.

“With a recession looming, ongoing inflationary concerns, more cash rate increases to come, and shorter-term mortgage rates potentially yet to peak there’s no suggestion of an end or bottoming to this current downswing,” he said.

“In the final few months of 2022, buyers and sellers made it clear they were not in a rush to complete property transactions. Sales volumes remained very low in the final quarter of last year as some buyers will have found it more challenging to secure finance while others will be taking their time to strike a better deal.”

However, Mr Davidson noted there are no signs of widespread forced sales, as unemployment levels remain low and households adjust to the new and higher interest rate environment.

Buyer types

Purchaser demand remains relatively stable, CoreLogic Buyer Classification data shows with relocating owner-occupiers (‘movers’) continuing to trade compared to mortgaged multiple property owners (MPOs, including investors) struggling in the current climate.

“There’s little surprise in the buyer demographics given investors face a 40% deposit hurdle, removal of interest deductibility, higher costs, low gross yields, and flattening rents,” Mr Davidson said.

“Higher term deposit rates may also be luring some people towards the bank rather than the property market.”

By contrast, the market share for first home buyers (FHBs) has held up well in recent months, as they remain committed, albeit in small numbers, to getting into the market even as mortgage rates rise and property values could potentially fall further. Similarly, Mr Davidson said MPOs buying with cash have retained a solid market share too, as some are likely to be taking advantage of relative ‘bargains’ becoming available in the current conditions.


As the property downturn became more widespread in 2022, the softening has not been uniform across the country.

Parts of the wider Wellington area (and central and lower North Island more generally) have been particularly weak, but by contrast many parts of Canterbury and Southland, as examples, have been more resilient.

“Much of the diversity in results comes down to differing starting positions for housing affordability, but also other influences such as the health of the underlying economy and the prevailing ‘mood’, which is harder to quantify,” Mr Davidson said.


The general outlook for the housing market remains weak, especially in light of the Reserve Bank’s predictions that the economy will enter a recession and inflation won’t start to ease until the second half of the year.

Mr Davidson said with the official cash rate forecast to rise to 5.5% in the first half of the year, resulting in typical mortgage rates of as much as 7% or more and unemployment levels expected to increase, it would create a tricky combination for the property market.

However, he did highlight some caveats around the weaker outlook, including no major risk of outright, large-scale job losses.

“The rise in the unemployment rate this year could be more about a larger labour force. For those already in a job and with a mortgage, there should be some protection from widespread repayment problems and distressed sales,” he said.

“The politics will also be worth watching and the now-confirmed General Election in October could drive some uncertainty and a temporary pull-back for sales activity around that time. Some investors will no doubt be hoping for a new National-led Government, and a reinstatement of interest deductibility, but nothing is guaranteed in politics.

“Overall, we suspect sales volumes will remain fairly low in 2023 and a fall in values of perhaps another 5 to 10%, taking the total drop from the peak to around -20%. However, the weakness in volumes and values may not necessarily extend throughout the entire year and if mortgage rates genuinely peak by the middle of 2023 this could lead to a pick up in buyer positivity and possibly an increase in sales, which tends to bring price falls to an end.”

Download the latest CoreLogic Property Market and Economic Update


Kelvin Davidson

Meet Kelvin Davidson

Chief Economist


Kelvin joined CoreLogic in March 2018 as Senior Research Analyst, before moving into his current role of Chief Economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.

Full profile

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