(Bloomberg) — New Zealand house prices rose for a third straight month in December, adding to signs a market recovery will continue in 2024, according to CoreLogic.
Values rose 1% from November and increased 2.1% in the fourth quarter, the company said Wednesday in Wellington. Prices fell 3.3% in 2023 after falling 5% in 2022.
Record immigration and expectations that the Reserve Bank may cut the Official Cash Rate this year are being seen as a fillip to the housing market after a peak-to-trough drop of 13% in the 18 months through September 2023. Still, the pace of any recovery may be patchy as slowing economic growth hurts household incomes and confidence.
“Although the general upwards trend for property prices is likely to continue in 2024, it may not be smooth from month-to-month,” said Kelvin Davidson, chief property economist at CoreLogic. “The likely recovery over the year ahead could undershoot some expectations, and prove to be a little underwhelming by past upswings. A lot hinges on how mortgage rates move.”
Davidson estimates values may rise by about 5% this year. By comparison, prices rose 28% in 2021 when interest rates were at record lows.
There are tentative signs that mortgage rates are near their peak with two-year fixed term products priced at 6.89% across the largest lenders compared with more than 7% in November.
The RBNZ last year signaled it didn’t intend to cut rates until 2025 and that there was a risk of an increase if pressure on core inflation fails to abate. Since those comments, an unexpected contraction in third-quarter gross domestic product has seen investors bet the OCR could drop to 4.5% by the end of the year from its current 5.5%.
CoreLogic constructs its index on a rolling three-month basis using prices once settlement is agreed. That means its series lags other housing indicators that have shown prices starting to rise from the middle of 2023.
The average house price rose to NZ$924,489 ($571,000), according to CoreLogic data. Prices gained from a month earlier in all six of the nation’s largest cities.
©2024 Bloomberg L.P.