At the end of last year, we suggested that a big-picture theme for the property market in 2023 would be continued weakness for the first half of the year but a more stable (or even gently rising) market later in the year – i.e. ‘the year of two halves’. As things have turned out, this prediction has proved to be fairly accurate (so far).
Indeed, give or take a few months – and allowing for the fact that house price indices have a natural lag to what’s happening (or already happened) in the real world – it does look increasingly likely that, in general, house prices have now found their floor, or are at least ‘close enough’ to that trough. If anything, the floor could become evident first in markets such as Auckland or Wellington, which have seen the earliest/sharpest falls to date.
But why does the downturn seem to be coming to an end? For a start, the choice of stock on the market has started to drop. In Auckland, for example, total listings are still about 10% above their lows of 2021. But they’re also about 15% below where they were at this time of year in 2020 and 2022. Reduced stock levels obviously create a bit more competitive pressure amongst buyers.
In addition, credit conditions have eased lately, with the CCCFA rules more relaxed and the LVR settings loosened a little. The labour market also remains very strong, which means that although household finances have been under pressure (from wider inflation, too), income security has ensured they’ve generally been able to negotiate the recent strains.
Meanwhile, net migration is soaring (to more than 70,000 in the year to April 2023), which ultimately amounts to stronger population growth and more property demand....
