Property prices tipped to drop more

• Author: RNZ
• Published date: 25 January 2023
• Publication title: Hawkes Bay Today

CoreLogic New Zealand’s fourth quarter (Q4) Property Market & Economic Update showed the quarterly drop in national home values was the smallest since May, at 0.9 per cent, with a monthly drop of just 0.2 per cent in December

“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,” CoreLogic’s chief property economist Kelvin Davidson said.

“Overall, we suspect sales volumes will remain fairly low in 2023 and a fall in values of perhaps another 5 to 10 per cent, taking the total drop from the peak to around 20 per cent.”

However, he said there could be a pick-up in demand by the middle of the year if the market sees a levelling-off of interest rates.

In the meantime, Davidson said buyers and sellers had made it clear they were not in a rush to complete property transactions in the last month of 2022.

Sales volumes remained low in the final quarter of last year, he said, with some buyers finding it difficult to secure finance, while others shopped around for a good deal.

In addition, he said there were no signs of widespread forced sales, as unemployment levels remained low and households adjusted to the new and higher interest rate environment.

Demand from first-home buyers had been holding up in recent months, while investors remained cautious.

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

“Higher term deposit rates may also...