House price index: Brakes go on housing market

The property market is entering a new phase as a growing supply of homes, higher interest rates and tighter lending rules are contributing to a slow down in price growth.

The Real Estate Institute's (REINZ) latest report shows the house price index, which measures the changing value of properties, rose 9 percent in the year ended March, compared with a 14.3 percent annual increase in February.

The seasonally adjusted national median house price rose $5000 in March to $890,000 but the annual growth rate fell from 13.5 percent in February to 7.9 percent.

However, the national median house price excluding Auckland fell $10,000 last month to $775,000. The annual rate was 14.1 percent higher than a year ago.

REINZ chief executive Jen Baird said the market was settling into a new cycle, after benefiting from an exceptional Covid-19 boost over the last two years.

"Following this period of significant activity and growth, prices are easing, and the market is returning to a more settled pace."

She said tighter lending rules, loan-to-value restrictions and rising interest rates have continued to reduce the pool of buyers who are willing and able to pay market prices.

The double rate hike by the Reserve Bank yesterday would see the market slow further as buyers reassess their ability to meet higher mortgage repayments, Baird said.

The number of properties sold fell 33.5 percent on a year ago to 6752, but the total number of properties for sale nationally increased by 32 percent from 19,437 to 25,659.

"While more stock makes this a favourable market for buyers who find themselves in a position to wait for the right property and negotiate - particularly buyers with their finances lined up - many are balancing fear of overpaying with an outlook of further interest rate increases."

On the flip side, sellers were also holding for the right price in a changed market, Baird said.

"As demand drops, vendors tend to choose to wait longer to sell their property rather than sell below those expectations."

Auckland's median residential property price increased slightly in March to $1.2 million to be 6.7 percent higher than a year ago, the fourth consecutive drop in the rate of growth.

With the exception of the Marlborough, all regions saw annual median price growth, but generally most of them reported fewer auction sales, fewer houses being sold, and properties taking longer to sell.

"As the market shifts to a new pattern, we note volatility across regions.

"Last month, we saw strong prices in Otago, Southland and Canterbury, in March these regions are down - a reflection of what is happening across the country."