CoreLogic economists say there's been a "soft start" to the housing market in the first quarter while a new tax year and interest deductibility rule changes are "unlikely" to "trump high-interest rates" for borrowers.
Shorter-term fixed mortgage rates would likely not drop much for at least another six to nine months, they said, if the Reserve Bank's projections prove correct.
The property data provider's house price index rose 0.5% in March, similar to January and February's gains, taking values 1.1% higher over the first quarter of 2024.
Average property value across the country now stood at $934,806, up 3.2% ($29,361) from the September quarter, but still 10.4% (-$108,455) below the most recent peak.
CoreLogic chief property economist Kelvin Davidson described the upturn in the housing market as continuing to be "inconsistent", reflecting varying "up and down" price growth across different centres and regions.
"March’s subdued property value data is a timely reminder that this upturn may well be inconsistent from month to month, and across regions,” he said.
"Certainly, although house sales volumes are now trending higher, they’re coming off a very low base, and activity remains well below normal.
"In that environment, it’s no surprise that value patterns are also a bit patchy."
He said first home buyers continued to target the market as they had in the past 12-18 months but demand from mortgaged investors remained "subdued".
'On the flip side'
Reflecting the "inconsistent nature" of the upturn, the Wellington, Christchurch, Dunedin and Auckland regions showed gains in prices, but both Tauranga and Hamilton edged down 0.2% in the March quarter, according to CoreLogic.
Davidson said "variable performance" also occurred within major regions.
"It's interesting to note the falls from the peak remain pretty large in Wellington, even after recent growth. Take Lower and Upper Hutt as examples, where values are still down from the peak by around 20% in both areas," he said.
"That decline probably isn't doing much for the moods of homeowners who purchased at the tail-end of the boom, but on the flip side, it may present a good opportunity for prospective new buyers."
Outside the main centres, March's data was also a "mixed bag", with Invercargill, New Plymouth, Napier, and Rotorua all rising by at least 1%, but Gisborne and Queenstown dropping 1.2% apiece.
Davidson said: "It's no surprise that some regions are rising more strongly than others in this current 'testing' market, while some are still actually falling.
"The general trend should remain upwards in the coming months, but it's unlikely to be a straight line everywhere."
Housing market 'not too hot, not too cold'
CoreLogic's chief property economist said the run of three softer results in a row at the national level was expected given stretched housing affordability.
"New Zealand's housing market can probably be described as 'not too hot, not too cold'.
"High mortgage rates remain a big challenge at the forefront of all borrowers’ minds, whether they’re taking out a new loan or repricing an existing mortgage.
"While the new tax year and 80% mortgage interest deductions will help cash flow for property investors, it's unlikely to be enough to trump high-interest rates."
The Government has passed legislation to begin restoring deductibility for mortgage interest on residential investment properties from April 1.
Davidson continued: “In addition, while the first official cash rate cut in the next cycle is getting closer, it’s certainly not here yet.
But the Reserve Bank has issued a warning that the OCR needs to stay high for a while longer. (Source: 1News)
"Indeed, if the Reserve Bank’s current projections prove to be correct, the cash rate may not start to fall until next year, highlighting that shorter-term fixed mortgage rates may not drop much for at least another six to nine months."
Davidson said a healthy amount of properties for sale meant better conditions for buyers.
"We’ve also seen a turnaround for listings activity in the first few months of 2024, with a good flow of fresh properties hitting the market, raising the choice for buyers and taking a bit of heat out of property prices.
"There’s no set definition, but the general sense is that the so-called sellers’ market of late 2023 has now switched back in favour of credit-approved purchasers."
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