According to a property analyst, the New Zealand property market is expected to experience "ongoing weakness" in 2023, despite a slowing in the market downturn in the final months of 2022.

The latest House Price Index (HPI) report from CoreLogic shows that property values fell by 0.2% in December, a smaller decline than the 0.6% reduction in November and 1.3% in October. The property market in New Zealand peaked in March, with the first monthly drop in prices recorded in April as the official cash rate climbed higher. This has restricted borrowing capacity and is expected to continue to do so, leading to further declines in value this year.

CoreLogic head of research Nick Goodall said that while the rate of decline slowed down in the last quarter of 2022, this did not signal a downturn given the continued inflation and a much higher official cash rate forecasted. "We don't expect this to signal the bottom of the downturn by any means, particularly given the outlook for further rate increases in the first half of this year," Goodall said. He added that this will continue to restrict borrowing capacity and until rates stabilize, we should expect to see further declines in value this year.

Property prices have fallen by 5% nationally across 2022, bringing the average house price from $1,007,000 at the start of the year to $956,000.

This remains the largest annual decline since June 2009, when prices fell by 6.4% as the market was still in retreat following the Global Financial Crisis. Goodall said that the Reserve Bank is forecasting inflation to remain stubborn this year, thus making a higher peak to the official cash rate necessary. This means a continued constraint on property demand and further value falls over a longer period.

Across the main cities, the HPI shows a moderate scale of value change in December, ranging from a 0.1% increase in Tauranga to a -0.4% fall in Christchurch.

Christchurch experienced the worst performance of the main centers in December, but remains the most robust center with an average value increase of 1% compared to this time last year. Meanwhile, in Wellington, average property values have fallen by 16.9% over the year. Goodall said that the volatility across the Wellington area shows a market going through turbulence, with more on the horizon. In Auckland, there was no significant change in value in December, with the exception of prices in Franklin falling by 2.4%.

The regional HPI also shows a theme of variable change in December. Palmerston North and New Plymouth recorded the greatest falls in December, with Palmerston North experiencing a 12.1% fall since the start of 2022, the worst performer among the regional house markets and the city's largest annual fall on record.

Despite some weakness seen in December, values in Queenstown continue to hold up, with values 6.6% higher than the beginning of the year, as tourism returned. Goodall said that those areas experiencing noticeable lifts in value should be treated with caution, as it may reflect a false sense of positivity regarding the market before the renewed warnings of economic weakness expected in 2023 alongside the increased peak of the official cash rate.