The QV House Price Index for last month showed the extent of the housing market correction and decreases in values were shown throughout many areas, although an expert doesn't foresee a lot more mortgagee sales.
Rising interest rates, credit constraints and inflationary pressures caused the drop below $1 million for the first time since last September.
The average home decreased in value by 4.9 per cent nationally in the three-month period to the end of July.
The average house value nationally is $989,790.
Christchurch has seen a relatively modest decline of 3.4 per cent for the quarter.
Local QV property consultant Olivia Brownie said economic pressures in Christchurch have had a dampening effect on the city’s housing market.
Following a similar trend from the previous month, the latest QV House Price Index shows a monthly decline in average house values of 1.2 per cent for the Garden City during July.
Brownie said the 3.4 per cent quarterly decline was up from the 1.7 per cent quarterly decline reported last month.
The average Christchurch house value now sits at $774,566, which is still 16.7 per cent higher than the same time last year.
"Sale activity has picked up slightly from last month in Christchurch, which can be attributed to seller’s expectations now meeting the market. The continuing increase of listings and softening market is affecting the lower end of the market more than the more expensive end of the market. This can be credited to the increase in borrowing costs for buyers," Brownie said.
Home values decreased by 3.6 per cent this quarter in the Selwyn district, with the average value now sitting at $860,431.
Annually that figure is still 20.9 per cent higher than the same time last year, Brownie said.
The Waimakariri district posted a quarterly decline in house values of 2.5 per cent, but the average home value remains 20.1 per cent higher than the same time last year at $709,236.
"While Canterbury has remained more resilient than most regions, economic pressures have taken effect," Brownie said.
"The next few months are highly likely to be more of the same, until the market finds some stability once costs start increasing at a slower rate."
Meanwhile, Queenstown was the only major centre to see positive growth over the last three months, although only at 0.2 per cent, he said.
In the Auckland region, the average value now sits at $1,410,163, falling 5.5 per cent in the quarter.
Wellington's average values fell almost 11 per cent in the same period.
Paul McCorry, QV operations manager, described the changes as "staggering".
"The almost 30 per cent national growth we were reporting at the turn of the year is now down to just 4 per cent and that is only half the story."
Wellington, Palmerston North and Dunedin had big increases in mid to late 2021. Those gains had now been wiped out and are now into negative growth over 12 months.
"That was the first time in a decade this has happened in Dunedin," McCorry said.
Wellington city's average home value dropped by more than $130,000 in the quarter while Hutt Valley and Porirua had values drops of 7 per cent to 9 per cent.
"While those numbers seem jaw-dropping, it's no surprise that the areas that saw the fastest gains towards the peak at the end of 2021 are now seeing the sharpest declines. One of the few exceptions is Christchurch, which had seen almost 40 per cent annual growth by the later months of 2021, but is now only seeing relatively moderate declines of 3.4 per cent for the quarter," McCorry said.
He doesn't see a big number of mortgagee sales looming.
"Following the GFC, mortgagee sales were common as job security was weakened and serviceability became an issue. If there were a lot of mortgagee sales, this current market correction could well tumble into a crash."
The Herald has reported on Ray White Remuera expecting more mortgagee sales and already listing two - in New Lynn and Lynfield, where loans were called in by finance companies not major banks.
McCorry said high employment would boost the housing market.
The most recent unemployment statistics, up only marginally to 3.3 per cent, demonstrate just how tight the labour market is, which is also supporting some wage growth, he said.
Loan-to-value ratios were acting as they had been designed to.
"Stringent LVR restrictions were much maligned by first-home buyers over the last few years but the insulation blanket of a 20 per cent deposit required by the Reserve Bank is now serving its purpose," McCorry said.
The Queenstown Lakes District is the only one of the 16 centres QV monitors to record positive growth in the quarter - up 0.2 per cent.
"With the removal of all border restrictions at the end of July, the obvious benefactor will be the tourist capital of the country," he predicted.
Auckland home values dropped an average of 7.7 per cent in the first seven months of this year, including 5.5 per cent in the most recent quarter to July. Waitakere had the biggest decline of -6.2 per cent, followed by Auckland's central suburbs -6 per cent, North Shore -5.3 per cent, Franklin -5.1per cent and Manukau -4.8 per cent.
Northland values fell 4.8 per cent in the quarter, the largest in the Far North down 6.5 per cent followed by Kaipara down 6 per cent.
Nelson values fell 3.5 per cent, the West Coast was down 5.8 per cent, Dunedin 2.6 per cent and Invercargill 2.7 per cent.
Tauranga values dropped 4.9 per cent in the July quarter while the average home value in Hamilton is now $858,401, down 6.8 per cent or $144,717 from the start of this calendar year. It remains 2.9 per cent higher than the same time last year, with negative annual home value growth looking likely in the coming weeks or months.
Rotorua values fell 4.8 per cent, Taranaki was down 2.7 per cent, Hawke's Bay dropped 7.4 per cent and Palmerston North fell by an average 8.7 per cent.
-NZ Herald and Star News
