Southland Housing Market Resilient Amid National Decline

Southland housing market remains steady, with Invercargill showing modest growth despite national declines.
Invercargill’s average home value increases by 1%, outperforming most main centres in the QV Index.
High interest rates and economic conditions continue to pressure New Zealand’s housing market overall.

The latest QV House Price Index reveals that New Zealand’s housing market continues to struggle, with home values dropping by an average of 0.9% nationally over the three months to the end of June 2024. This marks a larger reduction than the 0.2% quarterly decline observed in May. The average home value now stands at $916,285, which is still 2.8% higher than the previous year but 13.9% below the market peak in late 2021.

Auckland experienced the largest decline in home values, with a 2.6% drop this quarter, marking the fifth consecutive month of negative growth. Other significant decreases were seen in Tauranga, Palmerston North, and Wellington.

In contrast, Invercargill in the South Island saw a 1% increase in home values, outperforming most main centres. QV operations manager James Wilson noted, “There are some pockets of modest growth, most notably in the South Island. However, that also appears to be waning now.”

The South Island, particularly Invercargill and Dunedin, has shown relative strength in home values. Invercargill’s average home value is now $485,551, which is 7.1% higher than the same time last year. Despite this growth, the rolling three-month average rate has reduced from 3.2% in April and May.

“Tough economic conditions are making it extremely difficult for potential purchasers to save a deposit, secure finance, and service a mortgage with interest rates around 7%,” Wilson said. He added that many potential buyers are in “hibernation” until conditions improve, potentially after winter.

Downward price pressure is affecting all market segments, with investors, owner-occupiers, and first-home buyers taking a step back. An abundance of listings is also reducing competition and flattening growth across the country. Sellers are increasingly having to be patient, with many sales conditional on other sales, causing chain reactions that extend sales periods or cause deals to fall through.

Wilson expects home values to soften further throughout winter. “There’s currently nothing to suggest that house prices will take off again in the near future,” he said, pointing to the recent shortening of the bright-line test and the introduction of debt-to-income restrictions as factors keeping downward pressure on prices.

Invercargill’s modest growth contrasts sharply with the overall national trend. While the high interest rates and economic conditions pose challenges, the restoration of interest tax deductibility rules has started to bring investors back to the market. However, continued high interest rates limit significant price growth.