The CoreLogic Home Value Index fell by a further 0.5 per cent in July, taking the total drop since February’s “mini peak” to 2.5 per cent. Values remain around 16 per cent lower than the cyclical high point from around two-and-a-half years ago, but still 19 per cent above pre-Covid levels.

Values fell across each of the main centres in July, although areas such as Christchurch and Dunedin have been a little more resilient lately than other main centres such as Auckland and Wellington. More generally, it’s clear that affordability challenges and the elevated levels of listings on the market (giving buyers the pricing power), as well as the softening labour market, continue to weigh on property sales activity and home values.

% CHANGE IN MEDIAN PROPERTY VALUES, THREE MONTHS TO JULY

Turning to rents, the pace of growth continues to slow as net migration eases down from its very high peak, and the stock of available rental listings on the market rises.

There’s also a constraint on how much further they can rise, given that the level of rents is already high in relation to household income and, of course, wage growth is now slowing too. To be fair, rents aren’t falling to any meaningful degree, but previous rises have certainly petered out.

% CHANGE IN NZ RENTS IN YEAR TO JUNE

Over the past two to three years, gross rental yields (based on median rents and property values) have been trending slowly higher as values have weakened and rents risen. From a floor of 2.7 per cent in late 2021, they now stand at 3.8 per cent, which is the highest level since around mid-2016.

Auckland and Wellington City are hovering at around the three per cent mark, with Hamilton and Tauranga closer to four per cent, and Christchurch and Dunedin a bit above four per cent.

Even though rental yields have trended higher, they’re still quite low compared to mortgage rates, so no doubt would-be property investors are watching and waiting for interest rates to start falling to a more favourable level.

NATIONAL GROSS RENTAL YIELDS