Signs house prices will fall by 20%

The state of the housing market might be worse than you think – but it could also be better, property research firm Corelogic says.

It has released its latest market pulse, which includes several market trends that could indicate activity falling faster than some people appreciate.

Chief property economist Kelvin Davidson said a 20% fall in house prices in real terms was a reasonable expectation.

He said with house prices already down 5% or 6% and inflation about 7%, they had already come off 11% or 12% in real terms.

Home loans

Davidson said the amount of lending being done by the banks might obscure a bigger drop in activity.

There was a total of $7.2 billion in home lending in March, down from $10.5b a year ago but well above March 2020’s $6.2b.

Davidson said that might make people think there had not been too much of a drop, considering there were tighter lending rules, loan-to-value restrictions and higher interest rates.

But he said that obscured the fact that the rate of property price increase over the past two years should have driven up loan values significantly.

‘‘The total value is flattered by the average value being higher. That is a negative factor that people perhaps haven’t appreciated. If you look at the number of loans drawn down in March . . . it was actually the weakest figure for that month of the year since at least 2015. And taking January to March combined, total loans of 45,298 were significantly (37%) below the average for that same three-month period over 2015 to 2021.’’

Listings

Davidson said there seemed to be a perception that would-be sellers were flooding the market with new listings.

Realestate.co.nz said the number of houses for sale was up 70.8% nationwide in April compared to the same time 2021.

But Davidson said that did not reflect a rush of sales.

‘‘The number of new listings is normal for this time of year but sales are taking longer so stocks have been replenished and there are more properties on the market.’’

People who had secured finance and were looking for a property might have the impression that there was a lot to choose from, he said. Some buyers were still struggling to get loans so there was less competition.

But he said the increase had come off a low base and available stock for sale was about the same as in 2020.