'One of worst times for NZ house values': New CoreLogic data shows falls continue

New Zealand house values suffered one of the sharpest drops in the last three months, and that's predicted to continue, with interest rates forecast to rise again today.

Nick Goodall, CoreLogic NZ's head of research, said: "The quarterly fall of 4.1 per cent from July to the end of September ranks as one of the worst periods for national value falls on record, only marginally better than the three months to the end of August 2008 of -4.4 per cent in the wake of the Global Financial Crisis."

Things won't change soon either, he predicts, referring to the Reserve Bank's announcement due today.

"It's probably too early to suggest the housing market has moved through the worst of the downturn. With the OCR expected to increase a further fifty basis points to 3.5 per cent later today, that downwards pressure on house prices is likely to continue."

Auckland average values fell 4 per cent in the quarter to $1.3 million, Hamilton 2.7 per cent to $856,000, Tauranga 3.5 per cent to $1.1m, Wellington 8.5 per cent to $984,000, Christchurch 3.4 per cent to $756,000 and Dunedin 5.4 per cent to $645,000.

Goodall expects the OCR to rise today and next year. That could put more pressure on values.

Strong economic performance is obvious via low unemployment but strong gross domestic product figures. Goodall thinks that persistent inflation could see the OCR increase further into 2023.

That could prolong the current downturn in values. Restrictive credit rules, such as tight loan-to-value ratios, are also likely playing a role, he said.

The Herald reported yesterday consumers were turning to personal loans to make ends meet, as high inflation and rising interest rates put the squeeze on household finances.

The latest monthly report from credit bureau Centrix shows personal loan demand spiked in August to hit a 10-month high, eclipsing well over $500m in new lending.

It was the first time this year that the appetite for personal loans outpaced levels seen in 2021.

Goodall said that Auckland showed signs of stabilising, with a slight improvement on the fall of 4.6 per cent at the end of August. But it was probably too soon to call it a trend just yet.

Today, Barfoot & Thompson will release its Auckland and Northland data.

Last month, CoreLogic plotted houses in seven Auckland suburbs with $2 million-plus values taking a $100,000 hit.

The country's highest-end housing suburb Herne Bay, upmarket Ōrākei, Waiheke Island's most popular Oneroa, Onetangi and Palm Beach, northern seaside area Omaha in Rodney, and the eastern area of Shamrock Park near Howick suffered the biggest valuation drops out of 201 suburbs measured, CoreLogic said in September.

Herne Bay values fell 2.8 per cent, Oneroa was down 4.8 per cent, Onetangi down 5.7 per cent, Palm Beach down 5.3 per cent, Ōrākei down 4 per cent, Omaha down 7.4 per cent, and Shamrock Park values fell 5.4 per cent.

Today, Goodall said Wellington was continuing to experience the weakest performance of any area nationally. Values across the broader capital area including the Hutt and Porirua fell 2.5 per cent over the month and 8.5 per cent over the quarter, to be 9.1 per cent below the same time last year.

Property values had not fallen as far or as consistently in the Kāpiti Coast District, but after a drop of 1.8 per cent in September, the average value is now 3.7 per cent below the same time last year.

The Reserve Bank is widely expected to deliver another 50 basis point hike to the Official Cash Rate today as it moves to try to head off inflation in the economy.

The Herald reported yesterday that aspiring homebuyers will need to satisfy their banks they can service debt, at interest rates close to 8 per cent in some cases, to get their mortgage applications approved.

ANZ's "servicing sensitivity rate" is currently 7.95 per cent. Meanwhile, ASB's is 8.15 per cent.

Four months ago, both banks were stress testing mortgage applicants at 7.35 per cent.

BNZ's test rate is 7.5 per cent (up from 7.25 per cent in June), and Kiwibank's is 7.25 per cent.

Westpac is continuing to test mortgage serviceability by adding 2.5 percentage points to the interest rate a borrower wants to take out a mortgage at.