SunLive – House Prices: Rising interest rates are starting to bite

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The latest QV house price index shows that the housing market is increasingly under pressure from rising interest rates.

Credit affordability constraints are constraining buyers, and those in the market are spoiled for choice as listing levels far exceed demand.

The average home lost 2.2 percent in value nationwide for the three months ended April, compared with the 0.6 percent decline in quarterly change in value in March, with the national average now at $1,040,927.

This represents a compound annual increase of 14 percent compared to 18.3 percent annual growth last month.

In Tauranga, home values ​​fell this quarter, as they did in most of New Zealand’s major centers.

The city saw home values ​​fall by an average of 0.4 percent this quarter, following a 1.4 percent decline in April and only minimal growth in February (0.2 percent) and March (0.8 percent). .

The median home value here is now $1,193,589, still up 20.3 percent from the same time last year.

QV property consultant Derek Turnwald says Tauranga’s property market, which is peaking, is old news for a growing number of sellers.

“More and more properties are coming onto the market as previously held back owners are realizing the market has peaked. Quotation periods also lengthen as supply increases and demand decreases.

“Demand for housing of all types has declined and is now generally subdued. It’s now a buyer’s market, with agents also seeing noticeably less interest from Auckland buyers. As international borders open up, returning expats may be catching up on some of the slack, but equally we can expect many Kiwis to head overseas once they are able to.”

Image: QV.

“It’s no surprise that the biggest declines are in the locations that have experienced the strongest growth in recent years,” says QV Managing Director David Nagel

“These markets were the first to overheat, and that makes them more vulnerable to a correction in value when rising interest rates, credit crunch and affordability concerns hit.”

Palmerston North and Wellington have the largest three-month falls, down 5.4 percent and 3.6 percent, respectively.

Dunedin and Hastings are not far behind, each losing 3.4 percent.

Only 5 of the 16 major urban areas QV monitors have seen three-month house price increases, with Marlborough (3.4 percent) and Queenstown Lakes (3.2 percent) continuing to defy the downward trend in quarterly growth.

Queenstown is the only major urban location to see an increase in the rate of appreciation compared to the previous month.

“Declining attendance at open houses and declining auction clearance rates have been well publicized, showing a shift in the power balance between sellers and buyers.

“Developers are feeling the pinch, particularly in Wellington and Auckland, as unplanned sales quotas are not met, compounding the impact of material and labor shortages.

“A large part of the three-month depreciation took place in late March and April, so we expect a gradual escalation of depreciation in the coming months as sellers looking to sell their properties are forced to face the market.

“This is a trend that is likely to spread across New Zealand as supply continues to outstrip demand in most New Zealand cities.

“It is difficult to see things improving anytime soon as interest rates are expected to continue rising in response to inflationary pressures, while net migration is likely to be negative for the remainder of the year as borders open.

“Fortunately we have a well isolated banking sector with LVRs in place for much of the past cycle and the country is near full employment. The likelihood of wholesale mortgage defaults is low.”

Despite the recent quarterly depreciation, annual value growth remains positive, with the average property in New Zealand having appreciated in value by 14 per cent since April 2021.

The Canterbury region had the highest annual growth at 28.4 percent, while the Wellington region had the lowest growth at just 7.1 percent over the past 12 months.

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