PHOTO: Wellington, New Zealand. FILE
According to STUFF when you buy at the peak of the market with 90% mortgage and see the capital value of your home drop by 20%, that sinking feeling is real.
Wellington house prices continued to drop like a stone, losing 3.4% of their value in the last quarter, taking the average house price for the region to $857,000.
That’s brings the annual drop to 21% over the last year, according to the latest QV figures.
Wellington woman Jessica and her family bought a home in Pukerua Bay in November 2021 for $970,000 when prices were peaking.
An average current valuation puts her house at around $800,000, and with $856,000 still to pay on their mortgage, they were firmly in negative equity territory.
Jessica (who preferred not to use her last name) said the situation made them nervous and increasing interest rates were putting pressure on the family’s finances.
“We’re in a bit of tricky situation.”
“This going to be our family home long term, but I’m also really mindful that this factors into all of our decisions.
“For example, our fridge freezer’s broken, but I don’t want to spend another three grand on another one, because god knows what our mortgage payments are going to be at the end of next year.”
She said they were not in a position to think long term with scary numbers on the horizon; “I’m thinking how are we going to make our wages stretch.”
“We could be looking at $8000 a month in mortgage payments, and my kids both need braces.”
Stuff reported in January that two thirds of Wellington homes bought during the peak of the market in late 2021 were now in negative equity.
QV pointed out that average house values were still a lot higher than they were pre-pandemic, but factoring in inflation, those gains dropped to zero for some regions such as Wellington, with prices still falling.
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At the end of February 2020 when the pandemic hit, the average home value in the Wellington region was $744,483; three years later it was worth $854,092.
According to the Reserve Bank’s Consumer Price Index inflation calculator, $744,000 would be worth $858,000 over that similar time period.
QV Wellington senior consultant David Cornford said values continued to decrease in the Wellington region throughout February, with buyers having plenty of choice and no pressure to rush their decisions.
“Buyers are continuing to take a very cautious approach given the very high level of economic uncertainty. “There are very few investors in the market currently and those who are active are hunting for exceptional buys only.”
Nationally, the average house price dropped 12.6% in the past year with a 2.7% average decline during the quarter.
Real estate agent Mark Coffey of Bayleys Lower Hutt said factors in the economy and politics were leading many in the industry to believe the market could turn around by the end of the year.
“The perception that we’re getting from buyers is this year is the bottom of the market, but there’s no urgency there yet.”
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