House value growth 'completely peters out' - CoreLogic

National house values have dipped for their second month in a row, according to CoreLogic as its chief economist says a "shift in the market has been clear to see".

It continues to be a buyer's market for many as prices dipped by 0.2% in May after a minor 0.1% fall in April - with growth in home values "completely petering out".

Auckland led the slowdown with a drop of 0.8% in May - after a 0.6% fall in April, while Wellington saw a 0.6% fall, and Tauranga dipped 0.5%. By contrast, Christchurch rose 0.5%, and Hamilton and Dunedin both saw gains of 0.8% over the month.

CoreLogic's House Price Index now shows an average property value across NZ of $931,438, up by 1.0% from a year ago, but still roughly 11% below the peak.

The data provider's chief property economist Kelvin Davidson said although the national declines over April and May have been very small, the shift in the market is clear to see.

He said in a media release: "In the past few weeks, we've seen a raft of regulatory changes, including the abrupt scrapping of first home grants, the near-term easing of the loan-to-value rules and the introduction of debt-to-income caps.

"But with mortgage rates tipped to remain high for a while yet, it's no surprise the market has lost a bit of the momentum we had been seeing through early 2024."

He said the Government's forthcoming tax cuts would be "unlikely to change that".

The CoreLogic economist said the past two months of results meant "our expectations that 2024 will only really see the housing market ticking along remains firmly on track".

According to CoreLogic, Auckland has been at the forefront of the recent slowdown in values across the country, with Waitākere the only sub-market to avoid falls in May.

"The remaining markets saw declines ranging from 0.4% in Franklin to more than 1% in both North Shore and Manukau."

Davidson said: "There's always been a perception that Auckland leads the rest of the country in terms of property market performance.

"Although the evidence shows that isn't always the case, it's certainly still pretty striking that our largest city is now seeing renewed weakness in prices.

"With listings up, buyers now have the bargaining power, and it'll be interesting to see if this pattern spills over more significantly into other markets in the next few months."

Meanwhile, Wellington's property market also largely avoided meaningful gains in May.

"Values across Wellington's wider housing market remain 15-20% below their peak, but this doesn't mean affordability has magically been restored to normal. With property values still quite high and mortgage rates elevated too, buyers are still facing challenges."

Kapiti Coast was the only area to record a meaningful gain of 1.8%, while Porirua dipped 0.2%, and both Upper Hutt and Wellington City saw values fall in May by about 1%.

Outside the main centres, the housing market has been a "mixed bag".

"For example, Whanganui, Rotorua, and Queenstown all grew by at least 1% in May, but there were falls in values in areas such as Invercargill and Hastings, while Nelson was down by a more notable 1.0%," according to CoreLogic.

Davidson said: "High mortgage rates present challenges for all markets, whether they're large or small. Many provincial parts of New Zealand are also dealing with some migration issues, such as younger people heading overseas.

"That could well be taking a bit of steam out of the property market in these areas."

Davidson said: "An important factor still in play is the high stock of listings on the market, and the associated shift in bargaining power towards buyers, which is subduing prices.

"We also estimate that the shortening of the brightline test from July 1 could see as many as 50,000 or so properties benefit to some degree from reduced risk of having to pay capital gains tax, which could see some more listings coming to market."

The economist added: "Borrowers who have faced higher interest rates as their previous mortgage deals come to an end have coped pretty well with tight monetary policy thus far, thanks largely to the strong labour market.

"Looking ahead, a little less job security could see housing activity and prices remain fairly subdued."

Davidson said the rest of the year could "remain fairly subdued for the housing market, both in terms of sales volumes and property values.

"Affordability remains stretched and significant falls in mortgage rates probably remain a story for next year not this, especially if there's risk the upcoming tax cuts do prove to be slightly inflationary," he said.

"The removal of first home grants is unlikely to have a lasting or significant impact on new buyer demand, and the caps on debt-to-income ratios won't bite straightaway either.

"But even so, our expectation that 2024 will only really see the housing market ticking along remains firmly on track, with activity and prices set to remain variable from month-to-month and across regions."