Private property issue #64 - Today's house price data

The latest house price data came out this morning. Here's what you need to know.

People often ask, "when will house prices stop falling?"

By that, they mean, "when will New Zealand house prices stop falling?"

If you're a property investor, that's the wrong question to ask.

You don't care about NZ house prices as a whole.

You care about what happens in the region(s):

• You own investment properties in, or that
• You're thinking about buying an investment property in.

Here's why –

New Zealand house prices don't matter

Let's say you bought an investment property 3 months ago.

Since then, NZ property prices have fallen 2.2% (on average).

But what happened to the specific investment property you just bought?

It depends on where the property is.

If you bought in Wellington City, the price of your property has fallen 5.6% in just 3 months.

That's 3.5% worse than the NZ average.

But if you bought in New Plymouth, the property's value went up by 1.9% in the last 3 months.

That's 4.1% better than the NZ average.

That's why you need to think about what's happening in the region you want to (or already) invest in.

Don't worry as much about the country as a whole.

Some areas will hit the bottom of the market earlier than others

If you're trying to time the market – you need to know that some regions will bottom out earlier than others.

Use the table below to get a sense of which ones will bottom out first.

This table shows if house prices are falling faster or if things are getting better.

For example, Dunedin house prices fell 4.7% in the previous quarter (Nov '22 – Feb '23).

More recently (Feb – May '23), house prices in Dunedin fell just 0.5%.

While Dunedin house prices are still falling, they are going down more slowly. Things are getting better.

So Dunedin house prices may bottom out very soon.

Compare that to Tauranga. In the previous quarter, house prices there fell 1.6%. This quarter, they fell by 3.8%.

Tauranga house prices are falling more quickly. So they may take longer to bottom out than other parts of the country.

So if you're trying to time the market in Tauranga, you might hold off for a few months.

But if you're investing in Christchurch, Dunedin or Auckland, you might buy sooner. House price falls are slowing down. The market's momentum is improving.

The positive sign that won't get media attention

One of the most unmistakable signs of a housing market downturn is the number of properties sold per year.

Kiwis bought 100,000 properties in a single year at the market's peak.

Now it's down to 58,000. Yup, we're buying 42% fewer properties compared to 18 months ago.

But look at the trend in the graph.

Recently the falls have slowed.

We're still not buying as many houses. But it looks like we could hit the bottom and get a bounce back soon.

Some areas (like Waikato) have already seen an increase in the number of properties sold per year.

That's the first increase Waikato has seen since early 2021.

If people buy more houses, that's a sign that demand is coming back. When that happens, there will be more pressure on house prices.

To be clear, it's still too early to say that we've 100% hit the bottom of the market for the whole country.

But, house prices in places like Dunedin and Christchurch only dropped 0.5% in the last 3 months. How much further do they have to fall?