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House prices continued to fall until May and are now down around 6% since their peak last November, according to the latest figures from the Real Estate Institute (REINZ).

Kiwibank economist Jeremy Couchman described the month as “another bloodbath”, with the REINZ house price index falling for the sixth consecutive month.

Annual house price growth has now slowed to just under 4%.

“Since peaking in November, the seasonally adjusted HPI [house price index] fell 6%,” he said.

Sales were down 28.4% from a year ago (seasonally adjusted).

The median number of days to sell at 40 days exceeds the long-term average of 39 days.

“As buyers refrain from ringside carnage, the supply of listed properties is increasing,” he said.

“All of the above indicates that house price falls have yet to reach current cycle lows.”

Kiwibank expects prices to fall by around 10 or 11% by the end of the year.

Others predict even greater falls.

Westpac economists picked a 15% drop and financial services firm Jarden suggested we could see an 18% drop.

Falls on that scale were still “a distinct possibility,” Couchman said.

However, the labor market – with record unemployment – would continue to shield households (mortgage holders and renters) from a nasty income shock, he said.

New Zealand was also still suffering from a housing shortage, although it decreased significantly during the border closure.

Despite the issuance of record building permits, shortages of materials and labor were hampering the construction industry.

The construction boom is slowing as supply shortages are felt.  Photo/Michael Craig
The construction boom is slowing as supply shortages are felt. Photo/Michael Craig

“As a result, the net increase in housing stock in New Zealand is unlikely to be as dramatic as the current record building permissions data would imply.”

There was a fair amount of regional discrepancy in the data this month, noted ANZ economist Miles Workman.

Otago and Southland (HPI) broke the national trend and rose month over month (up 0.8% and 3.1% respectively).

However, these markets have a very low weighting in the national index, he said.

Auckland accounts for more than a third of the market and the HPI there fell 0.4% month-on-month.

Taranaki saw the biggest drop (-2.4%). Canterbury and Wellington’s HPIs fell 0.4% and 1.5% respectively.

“When housing moves (one way or another), it tends to pick up momentum, and right now it’s moving south,” Workman said.

“That in itself suggests there’s a lot more downside to come over the coming cold months, but the RBNZ has also upped the ante on hiking recently, and that should bring housing temperatures down another degree approximately.”

ANZ has lowered its house price forecast slightly – to a peak-to-trough drop of 12% (previously 11%).