The market is showing serious signs of having completed the house price bubble. Prices have returned to the Real price of pre 2019 and while some regions did not drop as much as others, that is usually because supply and demand is still out of balance.
Balance is retained for different reasons, but examples include:
Christchurch - supply was high post earthquake and demand was low so prices were already very suppressed, the bubble was never going to be big in Christchurch. I believe prices will remain higher, simply because new homes now cost more to produce.
Bay of Plenty (Tauranga as well as Rotorua) - supply was and still is too low for growing demand, mostly retirees escaping Auckland. This will hold up prices for both properties and rents. BoP and Hamilton are not as concentrated as Wellington or Auckland so prices remain below the bigger cities.
Charts below open to interactive tabs if you simply click on them.
Actual prices present a problem for comparison between regions. How do we know if the bubble is bigger or smaller between BoP and Auckland? This is best achieved by an index. eg I divide all the monthly data by the maximum average price reached in each region, mostly in February 2022.
However now we have a problem, the chart shows actual prices indexed, ignoring the impact of inflation as well as the impact of demand supply balance. A million dollar property when you earn $100,000 appears more expensive than a million dollar property when you earn $118,000, inflation has been 18% over this period. To make the comparison more relevant, here is the same index, adjusted for inflation.
I sneaked Lower Hutt into this chart, partly because I have properties here, but also because the size of the boom is sooo much bigger, showing that booms are not equal. Note the boom started due to RBNZ interest reductions, which were initiated in late 2020, when real prices were already rising.
Now the chart shows the point I made in the first paragraph, the house price bubble looks to be complete. All major cities are showing 2-8 weeks of stable prices. There is a bit of doubt about that in Auckland and BoP but the trend in Lower Hutt, Wellington and Christchurch is clear. I doubt we will see much more reduction in real prices.
How soon before we see real price increases is not clear.
Wonderful work!,