Feature article
Property values drift down -0.4% as the market enters a holding pattern
Will house prices crash or surge? Neither likely.
AI summary
New Zealand's property market is in a holding pattern, with a minor "downwards drift" rather than a slump. The Cotality Home Value Index fell -0.4% in August, with the national median value now at $797,944.
Regional performance is mixed; Auckland and Wellington are falling slightly, while Christchurch and Queenstown show resilience. Despite improved affordability, a fragile economy and election uncertainty are preventing a boom. A significant shift isn't expected until the labour market strengthens.
If you've been wondering whether house prices are about to crash or surge, the latest data suggests neither scenario is on the cards anytime soon.
Kelvin Davidson, Chief Property Economist at Cotality, breaks down why Aotearoa's property market is currently locked in a "holding pattern."
A downwards drift, not a renewed slump
The Cotality Home Value Index dropped by -0.4% in August, marking the fifth modest fall in a row.
Despite this, Kelvin notes that the national median value—now sitting at $797,944—is only around 1% lower than a year ago, "showing this is a downwards drift not a renewed slump."
In fact, the heaviest falls in property values actually occurred back in 2022 and 2023. Since then, many areas have been relatively flat. Today, values remain 15% higher than the pre-COVID mark, while still sitting 18% down from their absolute peak.
Main centres split as regional resilience shines
Of course, there is not one single housing market across the country.
"On one hand, Auckland and Wellington continue to fall a touch more than elsewhere, but Christchurch was stable in August," says Kelvin. Further south, Queenstown and Invercargill are standing out as other pockets that have "shown resilience lately."
Improved affordability, but no boom in sight
For buyers, there is a silver lining. Mortgage rates have fallen (although they have started to drift higher again more recently) and incomes have lifted, meaning affordability has improved significantly.
But does better affordability mean we are poised for strong value growth again? Not quite.
"The economy remains fragile, interest rates have lifted, and buyers retain a lot of the pricing power," explains Kelvin. He also points out that new house construction is more responsive than in the past, and November's upcoming election is looming large, "especially for concerned property investors."
All in all, current conditions are best described as a "holding pattern," with many measures just ticking along in a "broadly sideways drift."
The key to the next real shift? The labour market.
Until job creation and feelings of employment certainty pick up more emphatically—which Kelvin suggests might not happen until 2027—the housing market could remain subdued.
Author
Chief Property Economist, Cotality - cotality.com Kelvin joined Cotality (previously CoreLogic) in March 2018. 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.
In his role with Cotality, Kelvin’s focus is on keeping up to date with what’s going on in the property market and continually finding different ways for viewing and interpreting it. Kelvin’s economics background means that he knows his way around a spreadsheet, but more importantly he always puts more emphasis on providing the key insights and telling a story.
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