On the back of New Zealand’s record property price rises and deteriorating affordability, CoreLogic NZ today released a new Property Vulnerability Index, which analyses how an economic downturn or change in market conditions may impact property in different parts of the country.

New Zealand’s property prices have increased 27.8% in the last year with housing affordability declining to the worst levels on record, causing the Government and Reserve Bank to step in and try to engineer a slowdown to ‘sustainable levels’.

The Property Vulnerability Index takes into account a broad range of important economic and housing measures with weightings allocated based on their potential influence on future property market performance, and provides an indicative assessment of an area’s performance as a result. It is not intended as a forecast of values; instead a relative assessment of each area’s risk in the event of a more significant downturn in the property market.

The six categories include data on housing affordability (25%), Centrix credit reporting (20%), investor activity (15%), demand/supply rebalance (15%), Stats NZ local employment and economy data (15%) and Trade Me Property demand data (10%). 

CoreLogic NZ Head of Research Nick Goodall said the index highlighted Otorohanga and MacKenzie as the two most vulnerable Territorial Authorities while Waimakariri and Timaru appear to be least vulnerable. Of the six main centres, Auckland is most vulnerable and Christchurch least vulnerable.

Mr Goodall says, “There are a broad range of factors which will influence the future performance of the property market and these will vary in their relevance from region to region. The results show many of the country’s most vulnerable markets are smaller centres located in the central North Island. The upper South Island and Canterbury regions look less vulnerable than most of the rest of the country.

“It’s also important to note the areas expected to underperform may not necessarily see values fall; but in relative terms they face the greatest economic risks which makes them more vulnerable to a downturn.”

CoreLogic NZ’s Chief Property Economist Kelvin Davidson says the country’s housing market has been in a significant upswing phase for more than a year. “Following the 2020 lockdown, confidence rebounded, unemployment fell, mortgage rates were cut, and deposit requirements eased, alongside other official measures which played a role in the strong performance of the housing market,” he said.

“Of course, nothing can go up forever and the already stretched position for housing affordability across NZ has further deteriorated in the past year. The Government and RBNZ have introduced various measures to try and curb skyrocketing housing values, which alongside rising mortgage rates, should certainly prove a strong headwind to price growth.

“Should average annual property value growth across NZ fall to 1-2% across the regions, which is around what we’re currently seeing in monthly growth, there would be some areas above that figure and some below – potentially with values actually falling as we move into the next phase of the cycle,” says Mr Davidson.

Property Vulnerability Index