Good news and bad news for first-home buyers…
This year had more than its fair share of good news and bad news for prospective first-home buyers across Aotearoa New Zealand.
But the best news for prospective purchasers is that the latest QV Quartile Index, which tracks the value movements of the 25% most and least expensive homes in Aotearoa New Zealand, shows home values fell more on average at the bottom of the property ladder than the more expensive homes further up.
With December’s numbers yet to be finalised, lower quartile house values fell across the main urban centres by an average of 11.7% from January to November 2022, compared to an 8.6% average decline for upper quartile house values. The exceptions were Rotorua, Hastings, Tauranga, Christchurch, and Queenstown, which was the only centre where lower quartile values increased.
The largest home value drops in the lower quartile occurred in the Wellington region, specifically in Upper Hutt (-23.5%), Hutt City (-23.3%) and Porirua (-19.10%). Across other centres, lower quartile values also fell by an average of 15.9% in Dunedin, 14.9% in Auckland, 12.6% in Hamilton, 9.6% in Tauranga, and 3.7% in Christchurch.
QV spokesperson Simon Petersen commented: “2022 has restored a bit of credibility to the residential property market after the massively unsustainable capital gains of the last few years, but we’ve obviously still got some way to way to go before we get to pre-pandemic levels, with home values climbing by an average of almost 30% last year alone.”
He said the worst news for prospective buyers and home owners alike was what was likely to occur in the year ahead — namely the looming threat of a likely recession and further interest rate rises. The Official Cash Rate was lifted 75 basis points last month, with Reserve Bank governor Adrian Orr forecasting further increases and a “shallow recession” stretching from 2023 into 2024.
“When interest rates hit the roof, house prices are really going to hit the floor. But then there’s the growing likelihood of a recession. That’s not good news for home buyers or homeowners, because getting finance to buy property and then servicing a mortgage will become that much more difficult,” Mr Petersen said.
“But there could be little bit of light at the end of the long tunnel ahead of us. The upside of the current downturn is that, in the years ahead, prospective first-home buyers who have been locked out of the property market for so long should eventually have better opportunities to climb on that property ladder, without having to head across the ditch to accomplish their home ownership dream.”
Meanwhile, the latest QV House Price Index came out earlier this month. It showed mean average home values have decreased by 2.9% nationally over the three months to the end of November. The average value is $945,568, which is 10.2% lower, or $107,747 less in real dollar terms, than at the start of 2022.
Keep track of all these value movements and more via our interactive QV House Price Index.