House Prices Rise Modestly, Indicating Potential Market Shift

National house prices experienced a modest increase of 0.2% in February 2024, rising to a median value of $806,697. This uptick, reported by the property analytics firm Cotality, marks the strongest price movement since October 2023. While the data reflects a positive trend following a slight decline of 0.1% in January, experts caution that this change should be viewed with tempered optimism.

According to Kelvin Davidson, chief property economist at Cotality, the February results could signal a shift in the housing market. He noted that increased sales activity, falling mortgage rates, and a recovering economy might foster further price gains throughout the year. “With the labour market likely reaching its lowest point, and predictions indicating a decrease in unemployment, it is possible to see modest price increases ahead,” Davidson stated.

Despite the positive month-on-month growth, the national median price remains down 1.2% compared to February 2023 and is 17.3% below the peak of $975,540 reached in early 2022. Davidson emphasized that the market’s cautious sentiment among buyers and sellers necessitates a sustained upward trend over the next few months before drawing any firm conclusions about a recovery.

### Regional Insights

The data from Cotality indicates that all major centres recorded price increases in February. Notably, Hamilton and Dunedin showed the largest monthly gains, both rising by 0.9% to medians of $711,699 and $619,067, respectively. In Christchurch and Wellington, prices also rose by 0.6% and 0.4% to $701,152 and $777,690. Meanwhile, Tauranga saw a 0.5% increase, with its median price reaching $930,470.

On a quarterly basis, Dunedin outperformed with a 1.3% increase, while the Auckland market lagged behind. Although Auckland’s prices rose by 0.1% to $1.04 million, they fell by 0.8% over the quarter. Davidson remarked that although Auckland remains weaker compared to other regions, it has avoided significant price declines, with many sub-markets remaining stable or slightly improved.

### Market Dynamics

The Auckland region’s largest real estate agency, Barfoot & Thompson, reported that February 2024 marked the highest number of homes sold in that month over the past five years. The agency sold 1,609 homes during the first two months of the year, reflecting a 16% increase compared to the same period last year. Peter Thompson, managing director of Barfoot & Thompson, noted that the median price for February stood at $904,000, a decrease of 9.6% from January, while the average price fell to $1.013 million, down 13.3%.

Thompson highlighted that the combination of high sales volume and lower prices indicates a “structural change” in the market. He pointed out that the supply of housing is beginning to align with demand, thereby attracting buyers who previously felt priced out of the market. By the end of February, Barfoot & Thompson had 6,159 properties listed, the highest number for this time of year in 15 years.

Davidson acknowledged that while the current increase in listings may place some downward pressure on prices, the overall market activity is expected to rise throughout 2024. He indicated that the upcoming national elections and discussions surrounding property policies could also play a significant role in shaping market dynamics.

Despite the potential for a resurgence in buyer confidence, Davidson advised caution, noting that a balanced outlook suggests only modest price growth for the year ahead. The interplay of various economic factors, including mortgage rates and employment trends, will ultimately dictate the trajectory of the housing market as it continues to evolve.