Property prices predicted to have fallen up to 15% by mid-2023

New Zealand’s declining property market is expected to continue sliding well into next year.

Photo: RNZ / Marika Khabazi

CoreLogic’s House Price Index fell 2.3 percent for the last quarter with big falls in Auckland and Wellington.

Auckland house prices fell 4.9 percent for the three months from May, while Wellington’s were 4.7 percent lower.

CoreLogic chief property economist Kelvin Davidson said the price correction was due to inflation pressures, higher interest rates and tight credit availability.

The sharp post-Covid upswing in values had given way to a firm correction, he said.

Davidson predicted the national average property value would ultimately drop by 10 to 15 percent by the middle of 2023, which “broadly suggests we’re potentially halfway through this correction in both duration and scale”.

With the strong job market there was no need for homeowners to panic, he said.

“Generally there isn’t any great forced selling pressure out there. If people aren’t getting the price they want they can potentially de-list or look at other options.”

The quarterly market overview confirmed the slowdown of sales activity that became clear in the first quarter had flowed through to a marked decline in property values and was one of many challenges to hit the market.

The total value of residential real estate fell to $1.69 trillion at the end of Q2 2022, down from $1.73 trillion at the end of 2021, with mortgages secured against 20 percent of that value, and the other 80 percent household equity.

“The sharp post-Covid upswing in values has now given way to a firm correction, and the falls already seen to date have been spread across most geographical areas and price brackets.

“This weaker phase for the property market looks set to continue into 2023, and even when the floor is reached, the experience of the Global Financial Crisis (GFC) was that it took another two to three years for the next upswing to start as values plateau.”