CoreLogic’s House Price Index (HPI), which is the most complete and robust measure of property value change in the market, today showed nationwide values experienced the expected mini-bounce in October, with values up 2.1% over the month.

This was an increase on September’s monthly growth rate of 1.4%, and the first time in six months that price growth accelerated.

CoreLogic NZ Head of Research Nick Goodall says, “This acceleration in the monthly rate of growth can probably be explained by factors related to the Delta outbreak, including a renewed tightening of advertised supply while demand for housing remained high. 

“Aotearoa’s Alert Level 4 settings, which were enforced nationwide for two weeks on August 18 and lasted for five weeks in Auckland, had a noticeable impact on total listings. Already low levels of supply dropped further during this time and while inventory levels have since started to recover, advertised supply is likely lower now than otherwise may have been, which would have placed renewed upwards pressure on prices,” says Mr Goodall.

Chart 1

“At the same time, demand for housing appears to have been less affected. Confidence in the property market remains high and while tighter credit conditions, worsening affordability and increasing interest rates will weigh on market activity, the promise of tougher conditions in the future can actually lead to increased competition in the short term as buyers aim to beat any further policy intervention,” says Mr Goodall. 

From November 1, fewer owner occupiers are able to secure funding at a high LVR (>80%), with the RBNZ mandated speed limit halving from 20% of new lending above 80% LVR, to just 10% of new lending.

The standard 1 year fixed mortgage interest rate is already typically 100 basis points higher than in July, and with the Official Cash Rate (OCR) forecast to steadily grow over the next nine months borrowing conditions are only going to get more difficult.

“Tomorrow (November 3) the RBNZ will release its biannual Financial Stability Review, in which they may set out the consultation period for the implementation of debt-to-income (DTI) restrictions. Last week the Bank of New Zealand announced a DTI cap of 6 for some borrowers, which if implemented across all banks for all mortgage originations would impact one in four first home buyers nationwide,” says Mr Goodall.

The October House Price Index reveals the recent boost in prices were evident across each of the main centres.

Main Centres Chart

Value growth in Hamilton slowed slightly over the month (3.7%), but the monthly figure has been relatively volatile recently and the September rate of growth (5.2%) was unlikely to be sustained. 

The average property price in Tauranga increased by 4.3% in October, and 9.7% over the last three months – the fastest rate of quarterly growth of the main centres. The annual rate of growth, at 35.8%, is now the strongest on record (back to 1990).

Similarly in Christchurch, the annual rate of growth, at 31.9% is the strongest on record. With values increasing by 4.1% in October, and 7.6% over the last three months, the average property value in the Garden City is now $693,864. This takes it above the average value in Dunedin ($683,060) for the first time since November 2019, when Dunedin overtook the then stagnant Christchurch property market. After a month of no growth in September, values in Dunedin grew by 1.6% in October.

Property values in our largest city, Auckland, jumped a further 2.6% in October taking the annual rate of growth to 26.3%, yet another record. This is a staggering result, considering the average property value of $1.38 million, meaning values have increased by an average of $288,051 over the last year.

Incredibly, the dollar value of growth in the last year was higher in Wellington, where the average property value now exceeds $1.1 million; an increase of 36.1% over the last 12 months (or $292,501), yet another record.

Chart 3

“Across the main urban areas, the results were slightly more mixed,” says Mr Goodall.

“The average value in New Plymouth dropped by -1.6% over the month and the rate of growth slowed, but remained positive in each of Rotorua, Queenstown, Porirua, Kapiti Coast and Hastings. Meanwhile quarterly growth of 10.2% in Queenstown takes the average property value beyond $1.5 million – the most expensive in the country."

The annual rate of growth in Hastings and Napier hit record breaking levels of 41.9% and 39.4% respectively. Likewise, annual rate of growth records were set in Kapiti Coast (39.3%) and Lower Hutt (39.0%).

“As we approach the end of the year potential borrowers and current owners must prepare for increasing costs of home ownership, along with increases in other living costs. Regulation is also unlikely to go away as affordability continues to worsen and the property market remains a politically sensitive topic.”

Mr Goodall says the latest lift in houses prices was not unexpected and the longer term trend of slowing sales volumes and values will likely reassert itself before too long, due to rising mortgage interest rates and tighter tax and lending rules.

“However, in lieu of a big rise in unemployment, sharper falls in house prices still seem unlikely. The next update on the labour market will be the highly influential Q3 unemployment data from Stats NZ tomorrow.

“The construction industry and subsequent new build market also remain of particular interest as intensification plans improve. The latest bi-partisan announcement offers promising improvements for long term affordability, however a capacity constrained construction industry and lack of adjacent infrastructure support mean that any short-term impact is likely to be limited,” says Mr Goodall.