House prices haven't moved in real terms in a decade

New Zealand house prices have barely moved over the past decade, once inflation is taken into account.

Cotality says house prices were subdued again in October, dropping 0.4 percent. It was their seventh consecutive monthly decline.

National values are now 2.3 percent lower than a year earlier, at a median value of $790,987.

Cotality said the national median had increased by an average 3 percent a year over the past decade, to a total increase of 34.7 percent.

Inflation increased about 34 percent over that same period.

Values are still 19.1 percent below their cyclical peak, which was in January 2022.

The performance over the month was mixed around the country. Hamilton, Tauranga and Christchurch values held steady while Dunedin's dropped 0.1 percent. Auckland was down 0.7 percent and Wellington 0.9 percent.

"I think it's an interesting exercise to look at that 10-year growth," Cotality chief property economist Kelvin Davidson said. "It is a period that people have focused on in the past, this whole idea that property values in New Zealand have always doubled every seven to 10 years.

"Most people move house every eight to ten years so I think it's an interesting comparison… the last 10 years hasn't been normal but then what is normal?

"Obviously a lot of that growth came in the first five years… but 3 percent is an interesting number. It's pretty close to that inflation rate."

He said it was likely that house price growth would be lower in future because there had been an improvement in housing supply, the shift to dual-income households had happened, and there were other restrictions and potential taxes that could affect the market.

"We may not get a CGT this time around but Labour will get into power at some point and presumably that means CGT.

"I just think some of those things that have driven house price growth in the past could look a little bit different.

"Nobody has a hard and fast rule for it but if prices have grown 6 to 7 percent on average in the past few decades and we've been speculating that growth in future might be 3 percent to 4 percent on average over a 10-year period, you still get a bit of growth because of population change and wage growth in particular that will tend to push out house prices but I suppose it's just interesting that everybody's talking about the future … that future might already be here."

He said the overall figure was heavily affected by Auckland, which has been particularly weak. Some of that was due to the impact of the new unitary plan, he said.

"Auckland's only had 1 percent growth on average over the past 10 years. Maybe you say that's not quite normal.. you might not necessarily expect that to be repeated and as you move through time this current weak patch sort of drops out of the 10-year comparison and maybe in future it looks a little bit stronger in Auckland and therefore so does the national average.

"But I think it's worth noting… maybe we've already moved into the new normal where growth is lower and people are changing the way they might be thinking about property investment."

He said it would be interesting to see what an economic upturn looked like without house prices lifting significantly.

Davidson said sales volumes had drifted gradually lower throughout the year.

"With the seasonal spring uplift for new property listings now firmly underway, the stock of unsold dwellings on the market remains elevated. As such, provided that would-be buyers are confident about their own job security and can satisfy the bank too, they remain in a strong bargaining position.

"That being said, relatively few vendors are currently 'forced sellers', given that employment has actually remained relatively resilient through the cycle so far. Mortgagee sales also remain very low, at only about 400 in the past year, still well below the post-GFC level of more than 2600 at its worst. Even so, there's no doubt that the balance of power still lies with buyers in most cases, and hence property values remain subdued in many parts of the country."

He said it was possible that property sales volumes and prices could be sluggish for the next 12 to 18 months.

"Whichever way the election goes, a cautious view about house prices seems warranted.

"ACT's recent proposal to remove tax ring-fencing for property losses will have piqued the interest of some investors, but presumably there'd be a lot of political wrangling to be done first before that would become reality."

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