1. Plain vanilla month for property values in May
The Cotality Home Value Index for May showed a 0.1% drop in the nationwide median value to $818,132. Auckland, Wellington, and Christchurch were all weaker, but value growth in Queenstown, Invercargill, Rotorua, New Plymouth, and Hastings was stronger, although I wouldn’t necessarily call it a clear or lasting split between the major metros and the regions.
It’s clear the wider market is still struggling for direction, with some increases followed by drops or periods of no growth. This theme of conflicting forces has been around for a while now, with the boost from lower mortgage rates dampened by an abundance of listings, a soft economy, and the lurking effects of debt-to-income ratio caps.
At this stage, our forecast of 5% growth in property values in 2025 looks optimistic.
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2. Borrowers are keeping their options open
After some big shifts in recent months, loan terms stabilised a bit in April, with 30% of new lending (by dollar value) going out on floating rates, 39% fixed for 6-12 months (not much changed from 42% in March), and 32% fixed for longer than 12 months (pretty similar to 34% in March). That’s a reasonably even split and suggests that most borrowers are keeping their options open, keen to lock in a bit of certainty with a longer fix, but also to keep some of their loan floating in case market rates fall a bit further yet.
3. The worst might be over for house builders
Last week’s figures from Stats NZ showed a 2.6% rise in residential construction work over January to March, the first quarterly increase since 2022. Admittedly, that still leaves activity down by 25% from the peak, but upturns have to start somewhere, and there’s certainly evidence that the number of new dwellings consented has stabilised. The natural lags between consent and completion always meant the work put in place figures would take longer to stop falling, but we might be there now.
Cotality chief economist Kelvin Davidson: "It’s clear the wider market is still struggling for direction, with some increases followed by drops or periods of no growth." Photo / Peter Meecham
To be fair, a sharp upturn may not start straightaway, but the key point is that this apparent floor for construction activity has arrived at a much higher level than in the past, meaning the risks of any housing shortages emerging are reduced too. This is another reason for caution about the medium-term pace of house price growth – especially if the Government’s strong push on housing supply policies can stick through the electoral cycle.
4. Lower net migration still weighing on the property market
The first key dataset to watch for this week is April’s migration figures from Stats NZ on Wednesday. It’s worth noting that the annual net migration total has stayed positive lately, but has nevertheless dropped below average, and this is another reason why the housing market remains subdued.
5. Manufacturing up but retailers still feeling the pinch?
Also look out for May’s electronic card spending data (Thursday) and the Performance of Manufacturing Index this week (Friday). The former may be sluggish and the latter up a bit; emphasising again that the economic backdrop at the moment is still patchy.
