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  • Writer's pictureParry Singla

Slight declines in nationwide property values mask the emerging positive trends in important sub-mar

In August, the pace of the decline in average property values in New Zealand showed signs of slowing down, according to the CoreLogic House Price Index (HPI). Several key sub-markets actually saw increases during this period.

Nationally, property values decreased by only 0.2% in August, and the three-month change also moderated to a 1.8% decline. Currently, the average property is valued at $905,466, which is 13.2% lower than its peak value (a decrease of -$137,795), but still notably higher, by 24.3% ($177,190), compared to the pre-COVID figure in March 2020.

Kelvin Davidson, Chief Property Economist at CoreLogic NZ, pointed out that it's just a matter of time before the national average property values stabilize or even start to rise again. He also noted that the recent announcement by the National Party is likely to boost demand if they win the election.

Davidson stated, "Even though property values have continued to slightly decrease on a national scale, it's probable that we are approaching the bottom, as many of the key factors influencing the market are now shifting in a positive direction."

He emphasized that mortgage rates are likely near their peak, although slight fluctuations could occur due to global market volatility. Additionally, migration has significantly increased property demand, and the job market remains strong. The impact of loosened loan-to-value ratio rules implemented on June 1st is also becoming evident, with more low-deposit lending available to both owner-occupiers and investors with a 35-40% deposit, who were previously restricted.

Davidson also highlighted the potential influence of the National Party's housing policies if they come into power. A shorter Brightline Test could lead to more investment purchases but might also prompt existing investors to sell, given reduced capital gains tax liabilities. While the phased reinstatement of mortgage interest deductibility could boost sentiment, it may not significantly change the financial dynamics for many, as rental yields would still be low and mortgage rates high. However, existing investors would pay less tax under these policies.

Furthermore, the relaxed foreign buyer rules could stimulate demand and prices, particularly in local markets rather than across the entire country. For instance, in Queenstown, where approximately 10% of properties are valued at $2 million or more, the impact on foreign buyers could exacerbate existing shortages of affordable housing stock.

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