House prices have fallen by an average of $90,000 in parts of New Zealand after a turbulent year in the property market.

That meant homeowners who bought at the height of the property boom in late 2021 could find themselves with mortgages larger than the value of their home, especially in Auckland and Wellington.

But there were also some positives: the fall in prices was allowing more first-home buyers onto the property ladder.

The OneRoof Property Report for 2022, published today, captured the huge market shift during the year and highlighted some risks on the horizon for homeowners.

The housing market went from “fear of missing out” to “fear of overpaying”, Oneroof editor Owen Vaughan said, as a boom which started during Covid gave way to falling prices, tighter lending and uncertainty about the year ahead.

Nationwide, the average property value fell by 8.15 per cent, or nearly $90,000, since a high of $1.1m at the end of February. Values fell in every region except the West Coast.

Homeowners in Wellington and Auckland were worst affected.

The average property value fell 17.7 per cent ($201,818) in the Greater Wellington region since prices peaked in March, with some central suburbs taking a price hit of more than $400,000.

This was largely because of the withdrawal of Auckland investors who had driven much of the inflation since the Covid-19 pandemic.

In Auckland, average property values fell 12 per cent (more than $180,000) since the peak.

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James Wilson, head of valuations at Valocity, said the fall in prices in 2022 was the largest since 2010, but had to be seen in context: the boom since Covid was one of the strongest New Zealand had ever experienced, with average growth of 33 per cent nationwide between early 2020 and early 2022.

While the fall in prices may make the market more affordable for some, it raises concerns about negative equity for those who bought at the market’s peak.

“The data shows that the homeowners who purchased in late 2021 and early 2022 are more likely to be in negative equity position now,” Wilson said.

“Investors, those with more than two properties, are likely to be less exposed as a result of the 40 per cent deposit requirements for investment properties.”

Nicki Cruickshank, the principal of Tommy’s real estate in Wellington, said prices went higher than expected in 2021 so the drop this year was to be expected - but she had not expected the turnaround to be so sudden.

“But in the big picture most people own houses for 10 years-plus so overall they’ve still done well.”

Sanjeev Jangra, a Loan Market mortgage adviser who works in Auckland’s south, said interest rate hikes took people by surprise, especially last year’s borrowers who were not expecting them to go so high so fast.

There had been some positives for those wanting to get into the market. Jangra noted a switch in his client base from 40-50 per cent investors to around 80 per cent first-home buyers. Investors did not have enough equity after prices fell 15-20 per cent, he said.

Looking ahead to 2023, Wilson said he expected property values were likely to keep falling but at a slower rate.

A range of factors would have an impact on the market, including reduced sales activity, the election, and the Reserve Bank’s inflation battle.

“Inflation is the elephant in the room and won’t disappear overnight. But while cost of living pressures are reaching across nearly all parts of our daily lives, we’re actually not seeing a significant drop in spending and that’s probably because a lot of people still haven’t had to fix their mortgage at a higher rate,” Wilson said.

“When that happens and those mortgage rates begin to really bite, then spending is likely to dry up. Obviously, that has bigger economic impacts but the key question is: will inflation be tamed by traditional policy or will a hard, economic landing do the job? At this point, a lot of signs point to a harder landing than would be ideal.”

Highs and lows

• Steepest fall from market peak (region): Greater Wellington - down 17.68% ($201,818) from market peak of $1.14m
• Steepest fall from market peak (suburb): Waterloo, in Lower Hutt - down 23.9% ($279,200) from market peak of $1.168m
• Highest average property value: Herne Bay, in Auckland - $3.816m (down 2.3%, $91,000, on the previous year)
• Lowest average property value: Ohai, in Southland - $158,000 (up 28.5%, $35,000, on the previous year)
• Highest 12-month value change: Glenorchy, in Queenstown-Lakes - up 28.9% to $1.446m
• Lowest 12-month value change: Waiwhetu, in Lower Hutt - down 19.7% to $783,000
• Highest five-year value change: Raetihi, in Ruapehu - up 212.3% to $406,000
• Lowest five-year value change: Auckland Central, in Auckland - up 0.3% to $612,000

*Current to the end of October 2022

Top settled sale: Paritai Drive, in Orakei, Auckland. Sold in May 2022 for $20m

This Paratai Drive property in Auckland sold for $20m - the highest price in 2022. Photo / Supplied

Bottom settled sale: Romilly St, in Westport, Buller. Sold in June 2022 for $32,500

This home in Westport sold for $32,500 in June - the lowest house sale in New Zealand in 2022. Photo / Supplied

- by Isaac Davison, NZ Herald