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NZ CoreLogic home values fell 0.2% m/m in December to be down 3.9% y/y after -3.2% y/y. They have not posted a monthly increase since February but the 2024 average level was still 1.3% above 2023’s. There are signs that house prices may begin to rise again in 2025 as mortgage rates fall, new supply remains weak and affordability improves.

NZ home prices y/y%

• Q3 housing affordability recorded the third consecutive quarterly improvement to be up 3.2% y/y, the first annual rise since Q1 2021, but still 30% below trend. While incomes remain weak, the average mortgage rate was down around 90bp on the year in Q4 and house prices fell 3.1% y/y – helping to support a turn in affordability.
• This shift appears already to be supporting a recovery in demand with the REINZ reporting a 10.8% y/y rise in transactions in November and a drop in the number of days to sell to 42 from the 2024 peak of around 50. The median selling price is now up 0.6% y/y.
• Supply also remains constrained with October building consents for new dwellings still soft declining 3.5% y/y 3-month average but not as weak as they have been.
• Housing became more undervalued over the last year with it 12% below trend in Q3 compared with 6% below in Q3 2023, as measured by the ratio of house prices to CPI rents. Valuations should also encourage buyers into the market.
• While more respondents in the Q4 RBNZ household survey continued to expect lower house prices, the share is shifting back towards the neutral 50% level after almost 75% believed they would fall in Q3.

NZ affordability vs valuation % deviation from trend