The decrease comes ahead of the Reseve Bank’s OCR decision today.
After a couple of ‘flatter’ months in December and January, average values have dropped at least 1% for each of the past two months. CoreLogic’s House Price index is now down 10.5% or an equivalent $109,491 over the past year.
CoreLogic NZ Chief Property Economist, Kelvin Davidson said it was important to keep the falls in context of the 43% surge between March 2020 and March 2022, with prices currently still around 30% higher than pre-COVID levels.
He said the latest falls in February and March were part of the market cycle’s more recent trend and consistent with the underlying drivers.
“Almost regardless of what the Reserve Bank (RBNZ) decides to do with the official cash rate (OCR) later today, there are now signs of a peak for mortgage rates, while employment also remains healthy. But interest rates for both new borrowers and existing borrowers who are repricing remain elevated, and this is requiring some careful budgeting,” he said.
“Mortgage availability also remains restricted and neither buyers nor sellers are in much rush, meaning market activity is low. These factors make it easy to see why property values are continuing to drop.”
Mr Davidson said the market’s expectation is for the RBNZ to announce an increase in the OCR of at least 0.25%, possibly even 0.5%, at 2pm today.
However, he said this month’s hike could also be the last of the cycle, especially if the Q1 2023 inflation data shows a clear slowdown when released on 20 April.
“With inflation still an issue, it’s not out of the question that the cash rate will increase by 0.5%. However, there are fairly clear signs that the economy is faltering and the recent global banking sector problems point to a more cautious approach from the RBNZ,” Mr Davidson said.
“At the same time, the RBNZ won’t want to run the risk that financial markets start to ‘price in’ OCR cuts in the near term, which would undermine their inflation fight to date. The language in today’s statement will still be tough-talking. For borrowers, even if the current 6.5% or so is the ‘worst case’ for mortgage rates, don’t necessarily expect them to fall sharply anytime soon either.”
Read the full report on CoreLogic’s website.
Image credit: David McBee
Trying to put lipstick on a pig….people are paying massive interest rate hikes….
The crash will occur when mortgage foreclosures are in high numbers due to higher interest rates and completely depends on the number of mortgages coming off fixed terms while these mortgage rates remain high. tick tock.. Was this by design or by accident? What global event may have caused Western governments to start the money printers in the last few years, leading to inflation which necessitates increasing interest rates? Why are Labour always in government when the economy crashes?