Monday 9th November 2010
Gradual value decline continues
New Zealand property values continue to gradually decline according to the QV residential property indices for October.
Values are now 5.5% below the market peak of late 2007. After the peak, values dropped during 2008 to a low in early 2009, before rising again until early 2010, then beginning to decline again. Over the last twelve months values first rose 2.8 percent from October 2009 to March 2010, before falling back 1.6 percent since March. As a result, values are still 1.1 percent above last year, but that gap continues to close.
“The low level of sales activity we have seen all year continued through October, with sales well below both last year and the long term average. There is no sign of the traditional spring surge in sales, and we don’t expect any significant increase in sales before the New Year” said QV.co.nz Research Director, Jonno Ingerson.
“In most areas there are plenty of properties for sale, but many of these have been on the market for some time. The number of new properties coming on the market is lower than usual for this time of year. There remains a general air of caution around the property market. Some owners are choosing to stay rather than sell, some potential buyers are struggling to secure funding as lending criteria remain tight, and in general buyers are taking their time over purchase decisions” said Mr Ingerson.
“While nationwide values are declining, there is considerable variability within and between areas in response to local influences. The Auckland area is showing signs of stabilisation, while values in the Wellington area are dropping steadily. At a local level these trends also don’t apply universally, with quality properties in good areas attracting plenty of interest and often selling for good prices, while those with undesirable features are not selling or are selling at reduced prices” said Mr Ingerson.
While unrelated to the QV index, and a less reliable measure of value change, the average New Zealand sales price over the last three months has dropped to $399,055 from the $401,968 reported last month.
Unlike the decreasing national trend, values in the Auckland region have stabilised in recent months, and have dropped only 1.0% since March. Values rose steadily throughout 2009 before levelling earlier this year, so compared to the same time last year values are still 3.0 percent higher, but this gap has closed from the 4.3 percent reported last month.
Values in Hamilton and Tauranga have dropped in recent months, with Hamilton now 1.8 percent below the same time last year, and Tauranga 2.5 percent below.
Values in the Wellington area have dropped 3.4 percent since March, which is more than any of the other main centres. Values are now 0.6 percent below the same time last year.
The property market in Canterbury is slowly beginning to recover from the Earthquakes. The number of sales slowed dramatically in the weeks following the earthquake, but they are now beginning to pick up in the less affected areas.
The low number of sales in Canterbury since the earthquake means that the QV index still cannot be generated reliably. The various Canterbury area indices will therefore remain as they were published prior to the earthquake with values in Christchurch at the end of August 3.2 percent above last year.
Values in Dunedin have continued to be variable in recent months, and are now 0.9 percent above the same time last year.
Values for the combined provincial centres have been more or less stable since June before dropping over the last month. There is variability from centre to centre with some increasing in recent months, others stable and others decreasing.
Values remain above the same time last year in New Plymouth (1.2 percent), Wanganui (2.2) and Nelson (1.5). Values are similar to last year in Rotorua (0.6), Hastings (0.7), Napier (0.8) and Invercargill (0.0). Values are below last year in Whangarei (-4.0 percent), Gisborne (-2.7), and Palmerston North (-1.4). Queenstown is 5.6 percent above the same time last year when values had fallen rapidly to their low point.
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 Auckland Region |
| 3.0% |
| $521,526 |
| Hamilton |
| -1.8% |
| $347,099 |
| New Plymouth |
| 1.2% |
| $341,190 |
| Palmerston Nth |
| -1.4% |
| $283,313 |
| Christchurch |
| N/A |
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| Queenstown |
| 5.6% |
| $551,585 |
| Invercargill |
| 0.0% |
| $211,576 | |
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| Whangarei |
| -4.0% |
| $303,778 |
| Tauranga |
| -2.5% |
| $408,208 |
| Rotorua |
| 0.6% |
| $284,115 |
| Napier |
| 0.8% |
| $334,253 |
| Hastings |
| 0.7% |
| $322,729 |
| Wellington Rgn |
| -0.6% |
| $450,084 |
| Nelson |
| 1.5% |
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$374,655 |
| Dunedin |
| 0.9% |
| $269,378 |
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| New Zealand |
| 1.1% |
| $399,055 | |
Annual Property Value Change
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Main Urban Areas Commentary
Auckland
QV’s Residential Price Index for October shows that property values in the Auckland region are just beginning to level out, although have dropped by 1.0% since March this year. In contrast, values increased by 6.7% in the five months to March.
Consequently, values now sit 3.0% above the same time last year, but 2.7% below the market peak of late 2007 as the graph below illustrates:
Glenda Whitehead of QV Valuations said; “Auckland’s residential market feels relatively stable overall. Activity, such as open home attendance and buyer’s pre-approvals from banks, has picked up in recent weeks, and in some areas this is beginning to convert into more sales. This process seems gradual and is not the spring-surge many had hoped for, but some will take comfort in the fact that values continue to stabilise in general. Although the market continues to include mortgagee sales, on the whole, positive stories outweigh the negative ones”.
“Our valuers get the sense that those who own quality property are happy to sit on it for now, and perhaps pay down debt, with an expectation that better times lie ahead. To make a decision away from the status quo is unsettling for some, resulting in the relatively low level of listings for this time of year. A small sales trend noted is of infill sections in a number of suburbs since the beginning of this year. While availability and volume is still low, these were almost completely absent in 2008-09” Ms. Whitehead said.
“Within the former Auckland’s City boundaries, sales are ticking over without great pace or volume. In the traditionally well sought-after areas such as Epsom, Mt Eden, and Pt Chevalier, quality listings are met by a market ready to act. But properties are still a little slow to come to market, and demand remains somewhat muted. Buyers will only act if a property ticks all their boxes” Ms. Whitehead said.
“The central city apartment market continues to receive a reasonably healthy turnover of freehold investor-style apartments, typically trading under $200,000. Some investors are leaving this market, sceptical of the likelihood of future capital gains, although returns based on current values look relatively healthy. Many leasehold apartments continue to see their values fall as they approach ground rent reviews due in 2012” Ms. Whitehead said.
“On the North Shore, there appears to be more interest at open homes of properties in lower to medium price ranges. Attendees at these open homes don’t seem to be making decisions on defined time lines, and acting only if suitably impressed. We have also noticed more properties being marketed via auction, possibly with the hope of forcing the market into action” Ms. Whitehead said.
“Waitakere continues its stable path, with Te Atatu Peninsula and Titirangi attracting more interest than neighbouring suburbs. Investors in this market appear to have hunkered down. Manukau is displaying better activity in lower value brackets, particularly in Manurewa, Papatoetoe, Otara and Mangere. This activity is led by investors, but first home buyers are also now evident due to affordability in these areas. Prices are generally stable, although in a number of cases higher values are paid for properties that offer upside through renovation, or additional income potential from sleep-outs or cost-effective upgrades. Properties with the potential to have an extra household unit added seem to be trading at similar values to those that don’t, reflecting market uncertainty around the costs of building and demand for sections” Ms. Whitehead said.
Although areas have been amalgamated to form Auckland Council, QV will continue to breakdown this large geographic area by referring to the former council boundaries for the foreseeable future.
QV’s Residential Price Index is calculated using sales data from the 3 months leading up to the month being reported. It is not the same as the average sales price, which fluctuates in line with the mix of properties selling in upper or lower price brackets. The average sales price for the Auckland region in October was $521,526.
Hamilton
QV’s Residential Price Index for October shows that property values in Hamilton are fluctuating within a narrow band. Unlike most other major centres, Hamilton did not experience significant value recovery from mid to late 2009. Subsequently, values are now 1.8% below the same time last year, and 10.8% below the market peak of 2007, as the graph below illustrates:
Mr. Richard Allen of QV Valuations said; “Values across Hamilton City have been a little variable in October, with some parts of the city recording gains and other parts recording decreases. In the North East, property values decreased, South West Hamilton increased, Central City/North West area decreased and there was no change in South East Hamilton which is down by 3.1% over the past year”.
“The average sale price for the city also decreased from $359,800 in September to $347,099 in October. Although this measure is easily swayed by sales composition, it is the first time since December 2009 that it has fallen below $350,000. Traditionally the onset of spring and early summer results in a lift of confidence and mood and a surge in sales activity and volume. However, as a general lack of demand for homes persists, we are not seeing a traditional spring market. It seems as though the lack of demand is also putting off would-be sellers from listing, resulting in the low turnover characterising Hamilton’s property market” Mr. Allen said.
Tauranga
QV’s Residential Price Index for October shows that property values in Tauranga have held over the month. Unlike most other major centres, Tauranga did not see significant value gains in 2009. Subsequently, values are now 2.5% below the same time last year, and 11.4% below the market peak of late 2007 as the graph below illustrates:
Mr. Russell Oliver of QV Valuations said; “The residential property market in Tauranga has continued in a contracted state characterised by low sales volumes. This seems to be as a direct result of the reluctance of prospective purchasers to buy. Certainly, unrealistically priced property remains unsold in current conditions”.
“Whilst many centres in New Zealand have showed some improvement in the last twelve months, this has not been the case in Tauranga and Western Bay of Plenty Districts. Looking back, values have basically trended downwards, whilst fluctuating on a monthly basis. Although our index has held over October, we will need at least a few months of flat or improving values for the market to be deemed stable” Mr. Oliver said.
“Most sales which have occurred are still in the lower price brackets, continuing the trend previously reported. Activity in the over $700,000 bracket has been quite depressed” Mr. Oliver said.
QV’s Residential Price Index is calculated using sales data from the 3 months leading up to the month being reported. It is not the same as the average sales price, which fluctuates in line with the mix of properties selling in upper or lower price brackets. The average sales price for Tauranga in October was $408,208.
Wellington
QV’s Residential Price Index for October shows that property values in the Wellington region have continued to slide, falling 3.4% since March this year. In contrast, values increased by 3.6% in the five months to March.
Consequently, values now sit 0.6% below the same time last year, and 6.5% below the market peak of early 2008 as the graph below illustrates:
Mr. Pieter Geill of QV Valuations said; “Although our usual upsurge of spring activity is late this year, our Registered Valuers in Wellington get the feeling that the housing market may just be starting to pick up a little pace. We are not talking any sort of drastic turnaround here, but with better weather in recent weeks, we may start to see some people who have put off their property decisions starting to reconsider their options. Our phones have certainly been busier over the past couple of weeks”.
“Interestingly, we have noted that the little extra expendable income some have from the recent tax changes is helping when applying for finance. For those who were on the borderline with their loan approval, this may be all that is required to tip the scales in their favour. Conveniently for these people, there are plenty of sellers out there who are willing to discount in order to sell. It seems reality has hit home for some, and those who find themselves in a situation where they have to move on are going to lengths to ensure a sale” Mr. Geill said.
“There is still a lack of investor activity in Wellington’s property market. There seems more stock coming to market recently, which may have the effect of creating an oversupply in lower price bracket or investor-type suburbs if there is no counter in demand” Mr. Geill said.
“For homeowners in Wellington, uncertainty around a re-structuring public sector may well be having an effect. This has certainly contributed to the lack of activity over September and October, as well as the resulting value slides. Many are content to just wait and see what happens, and not make any major decisions just yet” Mr. Geill said.
“In the QV Rating side of the business, work is being completed on the updated rating values for some areas of Wellington. Upper Hutt rating values have already been issued, and these obviously reflect the changes in our property market over the past three years. Our rating valuers find that most homeowners are not surprised in the general decrease in rating values. Porirua City homeowners should expect their updated rating values this week, whilst Hutt City ratepayers will receive theirs in December” Mr. Geill said.
QV’s Residential Price Index is calculated using sales data from the 3 months leading up to the month being reported. It is not the same as the average sales price, which fluctuates inline with the mix of properties selling in upper or lower price brackets. The average sales price for the Wellington region in October was $450,084.
Christchurch
There is currently not enough sales evidence within the Canterbury region to update the QV index. The various Canterbury area indices will therefore remain as they were published prior to the earthquake with values in Christchurch at the end of August 3.2 percent above last year.
Melanie Swallow of QV Valuations said; “We have seen a small lift in property values across Christchurch City over October, but only in suburbs where there has been little or no earthquake damage. In such areas, agents report demand for quality housing, with some healthy sale prices being achieved. Our valuers are also aware of a number of private sales that have sold within a two to three week period. This is a very positive sign, indicating a strengthening market”.
“An increase in demand for housing in unaffected suburbs is exactly what our valuers expect to see. The market has had time to assess its situation and now normal market activity is beginning to emerge. The local economy is being stimulated by insurance and EQC payouts, bolstering the construction and property industry and placing demand on labour resources. This has helped kick-start the property market as Canterbury puts itself back together and people move forward with their lives” Mrs. Swallow said.
“It is still taking a bit longer for sales to go through because of the additional requirements surrounding engineer’s reports and delays securing LIM reports. But at this stage, the post-earthquake sales recorded for Christchurch are very encouraging” Mrs. Swallow said.
Dunedin
QV’s Residential Price Index for October shows that property values in Dunedin have recovered slightly over the last two months after dropping in the two previous months. Values now sit 0.9% above the same time last year, but 4.5% below the market peak of 2008 as the graph below illustrates:
Mr. Tim Gibson of QV Valuations said; “The residential property market within Dunedin City remained soft over the month of October, when compared to the same time last year. Lower sales volumes and greater selling timeframes have continued”.
“However, as per our index, there is an indication that declining values experienced over the past three to six months have begun to level off. There is also some evidence that individuals or families in good financial positions are taking advantage of the soft conditions. It is seen as a good time to sell and upgrade the family home. Some of this interest could also be attributed to recent personal taxation cuts” Mr. Gibson said.
“Well presented dwellings are still fetching good sale prices within a quick time frame. This reinforces that purchasers are looking for the cream of the crop when it comes to making their property decisions, while property suffering from deferred maintenance issues are taking longer to sell” Mr. Gibson said.
“Our provincial Otago township data is also reflecting similar market conditions to those displayed by Dunedin City. Sales in the three months to October within the Clutha District townships have shown a reduction in annual growth to just 0.1%, with the average sale price $173,000. This is at similar levels to previous months” Mr. Gibson said.
QV’s Residential Price Index is calculated using sales data from the 3 months leading up to the month being reported. It is not the same as the average sales price, which fluctuates in line with the mix of properties selling in upper or lower price brackets. The average sales price for Dunedin in October was $269,378.