Monthly Property Insights

Over the past month or so, there have been two key aspects to the housing market that have caught my attention: the continued flat patch for property values (even as sales volumes continue to increase) and the choices being made by borrowers around their loan terms and which lender in the first place.

Pushing back the start of a house price upturn

Over the past few years, property sales volumes (and mortgage lending activity) have been trending higher, with the falls in mortgage rates a key supporting factor. But given that they reached such low levels in 2022-23, only in the past few months has that growth finally managed to return the level of sales to some kind of ‘normality’ – i.e. around 95,000 on an annualised basis.

As such, we’re also now starting to see the number of listings available on the market decline gradually. But it’s definitely not a sharp fall in listings yet, so it’s pretty clear that finance-approved buyers retain the upper hand when it comes to price negotiations.

Consistent with this backdrop, the Cotality Home Value Index actually edged down by 0.2% nationally in July, with Hamilton and Tauranga rising, but Dunedin, Auckland, and Wellington falling further. There was a bit more resilience in many of the regional areas, but only in a relative sense.

So where does this leave us in terms of a house price forecast for 2025? Given we now have seven months of the year in the bag, and values have been barely changed over that period, you’d have to think that we may struggle to see even a lift of 1-2% this year; versus a 5% rise that may have looked on the cards back at the start of 2025.

Borrowers have a lot to weigh up at present

Of course, while some property owners and would-be sellers might be disappointed by those near-term prospects, there are always two sides to the coin – and first home buyers as well as ‘Mum and Dad’ property investors are currently enjoying conditions, with solid percentage shares of activity.

But that doesn’t mean it’s easy, and there are clear signs the LVR rules remain a hurdle for investors looking at existing properties, while the DTI rules are just starting to loom as a more significant factor too, as the internal test rates at the banks decline.

On top of that, there’s the decision about which loan term to choose. Ultimately, that’s down to the individual (and their advisor), but what we are seeing in the data is that bets are still being hedged – some debt on a floating rate and some being pushed out to fixed rates of 12 months or more. These decisions get a little more delicate as mortgage rates flatten out towards the trough.

But there’s also a lot of thinking being given to which bank to choose in the first place. In June, a record number of existing borrowers (around 3,500) jumped ship to a new lender, no doubt attracted by the cashbacks on offer. Of course, the ability to do so is also greater than in the past, given a recent focus on floating and short-term fixed rates, making it easier to switch without break fees.

Watching inflation and employment

In the near term, provided that inflation measures don’t become awkward, an OCR cut seems likely on 20th August. I’ll also be keeping a close eye on the labour market, as this is the key headwind for house sales and activity at present.