New Zealand house prices fell for the first time in eight months in April as high borrowing costs and a sluggish economy kept buyers on the sidelines, according to CoreLogic.

Values dropped 0.1 per cent from March, the company said on Wednesday (May 1) in Wellington. That’s the first monthly dip since August last year. Prices rose 0.5 per cent from a year earlier.

Optimism that prices were recovering late last year has seen increased listings, but buyers have remained cautious as the economy struggles to recover from a late-2023 recession. While mortgage interest rates look to have peaked, the Reserve Bank (RBNZ) signalled it isn’t ready to lower the Official Cash Rate any time soon, adding to signs that home loans will remain expensive for the foreseeable future.

“Inflation and the Reserve Bank’s plans for the cash rate remain hugely influential for housing market performance in the coming months, with significant mortgage rate falls potentially a story for 2025, not 2024,” said Kelvin Davidson, chief property economist at CoreLogic. He expects prices will rise about 5 per cent this year.

In February, the RBNZ projected the Official Cash Rate would stay at 5.5 per cent until early 2025. Most economists project a cut late this year.

The average two-year mortgage rate was 6.8 per cent in March, according to RBNZ data based on loans with a substantial deposit. That’s down from a peak of 7 per cent in November but compares with 6.5 per cent in March last year and 4.5 per cent in early 2022.

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Davidson said the softening trend in prices reflects a buyers’ market and that sellers have reduced bargaining power.

“Elevated stock levels mean buyers are in the ascendancy,” he said. “I’d expect house-price movements to remain a bit variable from month to month.”

Prices rose on an annual basis for a second straight month, after declining since late 2022. CoreLogic constructs its index on a rolling three-month basis using prices once settlement is agreed. That means its series lags other housing indicators that have shown prices starting to rise on an annual basis since late 2023.

The average house price fell to NZ$933,633 (S$750,512), according to CoreLogic data. Prices fell from a month earlier in three of the nation’s six biggest urban areas including largest city Auckland, where they declined 0.6 per cent. BLOOMBERG