House Prices: A Six-Month Window of Opportunity for Buyers?
New data suggests a period of stability in the New Zealand housing market, offering a potential window of opportunity for prospective buyers. Property data firm Cotality reports a slight decrease in property values in January – down 0.1% – with the median value now sitting at $802,617. This represents a 1% drop year-on-year and a 17.5% decline from the peak in early 2022.
Regional Variations: Where are Prices Moving?
The picture isn’t uniform across the country. While Auckland and Wellington experienced declines of 0.3% and 0.1% respectively in January, and 1% and 0.5% over the past three months, other regions showed more resilience. Hamilton and Christchurch remained flat, while Tauranga and Dunedin saw modest increases of 0.3% and 0.4% respectively. Queenstown continues to buck the trend, with prices rising 0.8% in the month and 1% over three months.
What’s Driving the Flatlining Market?
According to Cotality’s chief property economist, Kelvin Davidson, the current market is characterized by a balance of forces. Buyers are cautiously optimistic, benefiting from lower interest rates, but are also hesitant due to economic uncertainty and a good supply of properties available. “At the moment buyers still seem to be in the ascendancy and values are flatlining,” Davidson stated. Vendors aren’t forced to significantly lower their expectations, but aren’t seeing bidding wars either.
This cautious approach is linked to ongoing concerns about job security and employment levels as the economy recovers. The potential for earlier increases in the Official Cash Rate (OCR) had also created some nervousness, though recent weaker unemployment data may alleviate those concerns.
Construction Costs on the Rise
While existing property values are relatively stable, the cost of building a new home is increasing. Cotality’s Cordell Construction Cost Index shows a 0.9% rise in residential building costs in the three months to December, with an annual increase of 2.3%. While this is below the long-term average of 4.1% since 2012, it represents a shift from the extreme inflation seen in the post-COVID period.
The index is comprised of 50% materials, 40% wage costs, and 10% other expenses. Although supply chain issues have eased, costs haven’t fallen significantly. Interestingly, dwelling consents are rising again, reaching 35,500 on a 12-month basis in October – a recovery from a low point of between 33,500 and 34,000.
What Does This Signify for First-Home Buyers?
The current conditions are being described as favorable for first-home buyers. The combination of stable prices, lower interest rates, and a good selection of properties creates a more manageable environment. However, Davidson cautions that this dynamic may not last indefinitely, particularly as the economy strengthens and unemployment falls.
Investors are also returning to the market, but are likely to be closely monitoring political developments, particularly regarding potential capital gains taxes and changes to interest deductibility rules.
Looking Ahead: A Year of Two Halves?
Davidson suggests that 2026 could be a year of two halves. The first six months are likely to see continued stability, while the second half could see a gradual increase in prices as the economy improves. “It’s not hard to imagine things trending sidewards a bit further,” he said. “It could be a year of two halves in some ways for house prices – the first half of the year is trending sideways.”
Frequently Asked Questions
Q: Are house prices likely to fall further?
A: Cotality suggests a period of stability is more likely than significant price declines, but regional variations exist.
Q: What is driving the increase in construction costs?
A: Rising material and wage costs are the primary drivers, although the pace of increase has slowed.
Q: Is now a good time to buy a house?
A: Conditions are currently favorable for buyers, but this may change as the economy recovers.
Q: What impact will the election have on the housing market?
A: Housing market policies presented by politicians could significantly impact both buyers and sellers.
Did you know? Queenstown is currently experiencing price increases, defying the national trend of flat or declining values.
Pro Tip: Get pre-approved for a mortgage before you start house hunting to understand your borrowing capacity and strengthen your position when making an offer.
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