(Bloomberg) -- New Zealand posted its first annual gain in house prices in 18 months amid signs that a tentative recovery is under way this year, according to CoreLogic.

Values in March rose 0.1% from a year earlier, the company said Thursday in Wellington. That’s the first annual increase since September 2022. Prices rose 0.5% from February for a sixth straight monthly gain.

Buyers have been cautiously returning to the market in recent months as mortgage interest rates look to have peaked, although the Reserve Bank has signaled it isn’t ready to lower the Official Cash Rate any time soon. Still, prices rose just 1.1% in the first quarter after a 2.1% improvement in the three months through December, suggesting there isn’t a lot of momentum in the market.

“High mortgage interest rates remain a big challenge at the forefront of all borrowers’ minds,” said Kelvin Davidson, chief property economist at CoreLogic. “If the Reserve Bank’s current projections prove to be correct, the cash rate may not start to fall until next year, highlighting that shorter-term fixed mortgage rates may not drop much for at least another six-to-nine months.”

In February, the RBNZ projected the OCR would stay at 5.5% until early 2025. Most economists project a cut late this year.

The average two-year mortgage rate was 6.86% in February, according to RBNZ data based on loans with a substantial deposit. That’s down from a peak of 7.01% in November but compares with 6.43% in February last year and 4.29% in early 2022.

Davidson said the sluggish monthly price gains seen since the start of 2024 are a reminder that the market upturn may be inconsistent, while sales volumes remain well below normal levels, he said.

“Sales volumes remain on track to rise by about 10% this calendar year and property values by perhaps 5% — decent figures but slow by past standards,” he said.

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 rose to NZ$934,806 ($557,000), according to CoreLogic data. Prices gained from a year earlier in three of six of the nation’s biggest urban areas but fell in largest city Auckland as well as Hamilton and Tauranga.

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