Property values are showing modest trends upwards, but slow market won’t generate much capital gains tax revenue
New Zealand property values rose modestly in October, with first home buyers reaching a record market share as mortgage rates continue to fall and affordability improves.
The Cotality home value index rose 0.2% in the month, the second consecutive monthly increase following five straight months of falls from April to August. The national median value now sits at $812,000.
Cotality head of research Nick Goodall says the market showed regional variation, with southern centres performing more strongly.
"Across the main centres, the further south you go, the stronger the rise. From a 0.2% fall in Tāmaki Makaurau Auckland, to a 0.7% increase in Ōtepoti Dunedin," Goodall says.
Wellington recorded a 0.2% rise, only the third month since February 2024 where values increased. Provincial areas in the South Island saw more significant gains, with Nelson up 1.4%, Queenstown up 1.7% and Invercargill up 2.2%.
In contrast, some North Island centres declined. Whangārei fell 0.5%, New Plymouth dropped 0.3% and Palmerston North eased 0.1%.
The Cotality November Monthly Housing Chart Pack shows national median property values remained broadly unchanged over the three months to October, edging 0.1% lower and sitting 17.3% below the 2022 peak. Invercargill reached a new high, underscoring the relative resilience of provincial markets.
First-home buyers hit record share
First home buyers accounted for 29% of all sales in October, the highest share on record. At the same time, mortgage investors increased their market share to 25.1% of purchases, their highest share since April 2021.
Goodall says that recent regulatory changes and lower mortgage rates are fuelling the return of these investors, albeit most are still cautious given mild growth expectations.
“The possibility of a capital gains tax if the government changes next year will be on some investors' minds too," Goodall says.
Meanwhile, existing homeowners or would-be movers hit their lowest share at 23.6% in October, the lowest since the global financial crisis in March 2009.
Capital gains tax debate
Cotality chief property economist Kelvin Davidson says the timing of Labour's capital gains tax proposal is interesting given current market conditions.
Labour has confirmed it will campaign on a CGT at the next election, with the policy exempting the family home and applying to gains on residential investment and commercial property from a new valuation day in 2027.
Gains made before that valuation date would fall outside the system.
"The timing of Labour's proposal is interesting,” Davidson says.
“The market is getting busier but remains a touch below normal, affordability has improved, and investor participation is on the rise. Against that backdrop, the CGT debate naturally raises questions about behaviour, whether investors would hold properties longer to try and avoid the tax for a while, and how much revenue a tax might realistically generate.
"From a market perspective, timing and assumptions are important considerations. For such a system to collect meaningful revenue, property values would need to rise, yet recent years have seen only modest growth. Our data shows national median values up 10% since five years ago in October 2020."
Sales and listings
Sales volumes continued their upward trajectory, rising by around 6% in October compared with the same month last year, marking the 28th rise in the past 30 months from the 2022-23 cyclical trough.
New listings also lifted through the middle of spring, pushing fresh stock onto the market. However, the rise in available listings was largely absorbed by the lift in sales, leaving total stock about 12% lower than the same time last year.
The number of properties listed for sale remains above the five-year average, meaning the market continues to favour buyers, although this is still 12% below the same time last year.
“This means the market continues to favour buyers, though listed supply is down by greater margins in some regions," says Goodal.
This is particularly notable in the South Island, which could drive a rebound in values.
Outlook for the year ahead
Davidson says affordability is at its best level in several years, with a large share of fixed loans shifting onto cheaper rates. "Provided employment holds up, those factors point to a gradual lift in both sales activity and values next year.”
According to Goodal, with an expected OCR cut ahead, plus the easing of LVR restrictions in December, the mild rebound in property prices is likely to continue.
"However, given that economic and labour market recovery is still expected to be slow, and with the restraint to debt-to-income limits, there remains caution about strong house price growth in the medium term," he says.
