House prices in New Zealand declined for the third consecutive month in June, facing pressure from high interest rates that are prompting buyers to stay on the sidelines.

CoreLogic New Zealand reported on Thursday in Wellington that values dropped by 0.5% from May. Additionally, prices dipped 0.8% in the three months ending 30th June, marking the first quarterly decline since September last year.

The shift in momentum is attributed to the central bank's continued implementation of restrictive monetary policy, which is dampening consumer confidence and increasing unemployment, Bloomberg reports.

Although home-loan interest rates appear to have reached their peak, the Reserve Bank has indicated it has no immediate plans to reduce the Official Cash Rate. This suggests that mortgages will likely remain expensive in the coming months.

“The last 12 months could be described as a dead cat bounce with confidence perhaps misjudging the trajectory for mortgage interest rates,” according to Nick Goodall, Head of Research at CoreLogic. “Mortgage holders should prepare for similar levels of interest rates for the rest of the year, and homeowners for the market upturn to underwhelm, especially with job security now declining.”

Furthermore, in May, the Reserve Bank of New Zealand (RBNZ) forecast that the Official Cash Rate would remain at 5.5% until Q3 2025, despite economists arguing for an earlier rate cut due to sluggish economic growth.

According to RBNZ data based on loans with a substantial deposit, the average two-year mortgage rate was 6.75% in May. This rate represents a fall from its peak of 7.01% in November but remains higher than the 6.49% recorded one year earlier.

Prices increased by 1.8% compared to a year earlier, marking an acceleration from the 1% pace observed in May and the fourth consecutive month of annual gains.

CoreLogic constructs its index based on a rolling three-month average using prices after settlement agreements are reached. This method causes its series to lag behind other housing indicators, which have shown price increases on an annual basis since late 2023.

Moreover, according to CoreLogic data, the average house price decreased to NZ$927,284. Prices declined from the previous month in four of New Zealand's six largest urban areas, including Auckland, where prices fell by 1.2%. Prices remained unchanged in the other two urban areas.