By Susan Edmunds of RNZ

New Zealand’s housing market downturn hit Wellington hard – and one suburb of Wellington in particular.

Data from CoreLogic shows the Wellington suburb of Northland had its values fall from a peak of a median $1.42 million in December 2021 to $985,000 at the end of February, a 30.6% fall.

Head of research Nick Goodall said suburbs across the Wellington region dominated the list of the biggest value falls from the peak of this cycle to the trough.

He said the drop in Northland and Wellington more generally was reflective of the extreme growth seen in the Covid period across much of the country, driven by cheap and available credit.

That growth did not hold up once interest rates started to increase. The housing market then struggled further recently when the economy softened and unemployment started to rise.

“Perhaps it shows the values being paid for properties there were well above true value, driven more by FOMO and a desire to get into the market at all costs, but that’s a bit speculative on my part.”

Property investor Steve Goodey said Northland had “boomed hard” during the market peak. “It’s very close to the Kelburn campus for Victoria University and international students just haven’t come back in the numbers we had before.”

He said that could put rent under pressure.

Brad Olsen, principal economist at Infometrics, said Wellington in general had dealt with a number of factors that had hit its housing market hard.

The economic environment was challenging, and a housing shortage in previous years had helped drive up prices, which then fell when people could no longer afford to pay them.

Some buyers were opting to move further out of town, which also reduced demand for more central suburbs such as Northland, he said.

Wellington had some of the lowest population growth last year, at 0.2%, but Northland itself had been flat and had lost more population than it gained over the past four years. It might also have been a popular spot for public sector workers who have faced job insecurity.

CoreLogic’s data for February showed Kāpiti Coast prices up 0.3% for the month, Porirua flat, Upper Hutt up 0.5%, Lower Hutt up 0.4% and the central Wellington area flat.

“Wellington still faces some economic challenges in the near term, given the restraint on public sector expenditure. But housing affordability across the capital is far less stretched than it was 2-3 years ago, which is likely to have played a role in helping bring some buyers back to the table in February,” economist Kelvin Davidson said.

The central Wellington region still has prices 1.1% lower than three months ago.

- RNZ