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Thursday 7th October 2010

Lack of sales continues

Property values across New Zealand continue to gradually decline according to the QV residential property indices for September.

Values are now 5.3% below the market peak of late 2007. After dropping 9.6 percent from the peak to a low point in April 2009, property values recovered throughout the rest of 2009 and early 2010. Between September last year and March this year values increased 3.4 percent. Since March values have begun to ease back again, dropping 1.4 percent. As a result the change in the index over the past year is still positive at 2.0 percent, but the gap is continuing to close.

“The New Zealand housing market is currently experiencing a very low level of sales activity, as has been the case for several months now” said QV.co.nz Research Director, Jonno Ingerson.

“The low number of sales is due to some buyers choosing to hold back to see where the market will go, others who are being very cautious in their decision making, and others unable to find suitable properties. There are also some financially secure vendors who are holding out for their desired sale price rather than being tempted by low offers” said Mr Ingerson.

“QV Valuers, particularly in Auckland and Wellington, are reporting that there is a general lack of well presented, quality properties on the market at present. Those that do come up are selling quickly and for good prices. Properties that are not well presented, lacking maintenance, or with perceived flaws are either failing to sell, or buyers are discounting their offers accordingly” said Mr Ingerson.

“Value trends are particularly variable at the moment, with different patterns emerging in response to local conditions. Main urban area values appear to be stabilising, but there is variation between cities and across the price range. Values in the provincial centres have been flat for several months now, while in the rural areas house values continue to slide back” said Mr Ingerson.

Mr Ingerson said “the earthquakes have led to a significant slowdown in the number of house sales in Canterbury. Banks, insurance companies and potential buyers are all doing careful due diligence and seeking reassurances over the structural integrity of properties. This has slowed down the whole sales process, even those which were under contract prior to the earthquake. However there are positive signs of normal market activity now beginning to return, especially in less affected areas of Christchurch”.

“There were insufficient sales in Canterbury in September to create statistically valid indices, so we are unable to gauge how house values have been affected since the quakes. The Canterbury area indices will therefore remain as they were published last month, with values in Christchurch 3.2 percent above last year. We will provide updates as data comes through in the coming months” said Ingerson.

“The lack of Canterbury data will not have significantly affected the overall New Zealand index as prior to the earthquake values in Christchurch were showing similar trends to the other main urban areas” said Ingerson.

“Looking ahead for the rest of the country, we anticipate that the current trends will continue in the coming months. While the number of new listings is likely to increase through spring and summer we don’t expect sales volumes to increase dramatically” said 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 $401,968 from the $407,900 reported last month.

Values in the Auckland area increased steadily through most of 2009 and early 2010 before falling slightly for a couple of months in April and May, and since then have been relatively stable. As a result values are still 4.3 percent above the same time last year but this gap is continuing to close.

In the Wellington area values have dropped 2.8 percent since April and are now only 0.3 percent above the same time last year.

Values in Dunedin have been variable in recent months but have dropped since March and are now 1.5 percent above the same time last year.

Unlike the other main centres, Hamilton and Tauranga did not see a significant increase in values this time last year. In both cities values have been dropping for most of 2010 and are now below the same time last year by 1.4 percent in Hamilton and 1.8 percent in Tauranga.

In the provincial centres values have been more or less stable for the past few months and there are signs that values may have increased over the last month in many towns. As a result, values in most of the provincial centres remain above the same time last year, although the gap continues to close.

Napier (2.6 percent), New Plymouth (2.5), Wanganui (3.0), Nelson (2.4), Queenstown (2.6) and Invercargill (2.3) all remain above last year.

Rotorua (1.3 percent) and Hastings (0.7 percent) have values similar to last year, while Whangarei (-2.7 percent), Gisborne (-0.7) and Palmerston North (-0.3) all have values lower than they were a year ago.

		NZ MAIN AREAS   SIGN UP TO YOUR AREA
Auckland Region 4.3% $520,862 Hamilton -1.4% $359,800 New Plymouth 2.5% $347,893 Palmerston Nth -0.3% $276,125 Christchurch N/A Queenstown 2.6% $539,488 Invercargill 2.3% $215,739				Whangarei -2.7% $309,043 Tauranga -1.8% $415,568 Rotorua 1.3% $286,374 Napier 2.6% $333,478 Hastings 0.7% $320,208 Wellington Rgn 0.3% $453,023 Nelson 2.4% $383,170 Dunedin 1.5% $274,112
		New Zealand 2.0% $401,968     Annual Property Value Change     Average Sales Price
		View FAQs on the Property ValueMap

Main Urban Areas Commentary

Auckland
QV’s Residential Price Index for September shows that property values in the Auckland region are relatively stable, having dropped by only 0.9% since March this year. In contrast, values increased by 5.3% in the 7 months up to March.

Consequently, values now sit 4.3% above the same time last year, but 2.6% below the market peak of late 2007 as the graph below illustrates:

 
Glenda Whitehead of QV Valuations said; “Activity within the Auckland residential market remains decidedly dull.  Interest rates appear not to blame, and as this slow activity perseveres, perhaps we are beginning to see a fundamental change in attitude within the market”.

“There is no doubt that with limited likelihood of capital gain in the short and maybe medium term, owners must see the costs of selling an existing property as a real factor.  This cost of sale could be the cause of inflexible asking prices, while the likely lack of capital gain is holding down offer levels. Perhaps we have something of a stalemate, with the exception of more motivated vendors. We have also received reports of more vendors selling privately, thus reducing selling costs” Ms. Whitehead said.

“Also to note is the impact of the tax changes to the property market.  It is still unclear whether these have slowed turnover, or changed the compositional mix of active market participants. Given there is much talk about debt reduction and would-be participants sitting on their hands, this may be a more influential factor than the tax changes themselves. Many of our clients are simply re-financing, confirming this focus on debt reduction” Ms. Whitehead said.

“From within Auckland City we have mixed feedback, reflecting the many local and suburb-level trends.  In some areas there seems to be a backlog of listings, but contrasting this are reports of a lack of quality family homes on the market. Overall it seems as though buyers continue to lack urgency, probably based on the wider market consensus that it is a buyer’s market. However, some brokers indicate an increasing number of buyers are getting bank pre-approvals, so there could be some pent-up activity in the pipeline” Ms. Whitehead said.

“Property values in South Auckland have generally stagnated over the past couple of months.  This is reflected by subdued activity and cautious buyers, despite some banks relaxing their lending criteria recently.  Investor suburbs like Otara, Mangere, Papatoetoe and Manurewa generally appear to have reasonably good turnover of sales compared to other suburbs.  This is in part due to the large presence of mortgagee or forced sales.  QV’s registered valuers note that there is an increasing trend of owner/occupier buyers looking at investor suburbs like Manurewa, Otara and Mangere.  This may be due to buyers moving into more affordable suburbs; downgrading their expectations to meet their financial circumstances with more negotiation power in forced and mortgagee sales” Ms. Whitehead said.

“Within Waitakere City, QV valuers sense a slight lift in market activity over the past fortnight, perhaps due to a shortage of stock in many of the popular suburbs such as Te Atatu Peninsula and New Lynn. First time buyers are noticeably more active now, and a small number of investors are looking at their buying options. There is also more construction occurring in a number of Massey subdivisions. Anecdotally, there appears to be fewer mortgagee sales in this wider area” Ms. Whitehead said.

“On the North Shore, values appear stable after downward pressure several months ago.  Transaction levels have remained low as many people continue to sit on the side line, and sale times appear to be extending. Mortgagee sales continue to be noted in many suburbs” Ms. Whitehead said. 

“The market for lifestyle and rural properties in South Auckland continues to be depressed, with properties staying on the market for long periods of time, and sale prices indicating that values continue to slip further” Ms. Whitehead 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 the Auckland region in September was $520,862.

Hamilton
QV’s Residential Price Index for September shows that property values in Hamilton are slowly easing. Unlike most other major centres, Hamilton did not experience significant value recovery from mid to late 2009. Subsequently, values are now 1.4% below the same time last year, and 10.9% below the market peak of 2007, as the graph below illustrates:

Traditionally, the onset of spring and early summer results in a lift in confidence and mood with an associated surge in sales activity and volume. At this stage, there is not yet any indication that activity and values are beginning to recover, instead values up to September continue to slide across the Hamilton residential property market.

In the last three months, values appear to be down across the board, but with greater declines in the top half of the market. The lower value brackets of the market have only dropped about 1% during the last 3 months.

It is hard to see where the much needed market stimulus is going to come from in the very near future. If the market follows its usual seasonal course, there may be something of a spring uplift before Christmas, but likely at a subdued level.

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 Hamilton in September was $359,800.

Tauranga
QV’s Residential Price Index for September shows that property values in Tauranga are easing. Unlike most other major centres, Tauranga did not see significant value gains in 2009. Subsequently, values are now 1.8% below the same time last year, and 11.4% below the market peak of late 2007 as the graph below illustrates:

Mr. Shayne Donovan-Grammer of QV Valuations said; “It is quite apparent that the Tauranga market is struggling to gain traction. The improving spring weather hasn’t shown any noticeable improvement in terms of activity to date”.

“There appears to be a two-tier market emerging. On one hand, sellers who are not in a forced or anxious situation are eventually achieving a sale at a reasonable level. On the other hand, more desperate sellers who need to sell quickly are doing so at heavily discounted prices” Mr. Donovan-Grammer said.

“Reality has set in on the market, as buyers realise that the market is not going to get away from them any time soon. They can therefore take their time deliberating over a potential purchase” Mr. Donovan-Grammer 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 September was $415,568.

Wellington
QV’s Residential Price Index for September shows that property values in the Wellington region have continued to decrease, by 2.6% since March this year. In contrast, values increased by 3.0% in the 7 months to March.

Consequently, values now sit 0.3% above the same time last year, but 5.7% below the market peak of early 2008 as the graph below illustrates:

Mr. Pieter Geill of QV Valuations said; “Residential property values in greater Wellington have been gradually falling over the last few months. The market is generally characterised by low volumes of sales and a lack of pressure on buyers to commit to the sale process. As such, some believe it is a good time to buy”.

“September has continued in much the same way. However, a number our clients are saying that they can’t find a suitable property to buy, and are consequently holding off from buying or selling.  Similarly, some agents are saying that they can’t get enough listings for the level of enquiry they are receiving and would love to have more listings. Interestingly, this shortage of stock is not having the affect of holding up values, as it did in winter 2009. Conversely, values have still been sliding, highlighting the recent lack of drive from buyers” Mr. Geill said.

“Our registered valuers have noticed less valuation work coming from home buyers, and more work coming from people who are upgrading their existing homes. This indicates that some homeowners are more concerned with paying off debt rather than trading-up the property ladder. This is essentially limiting the available stock for sale and could exacerbate the current situation. We are however also working for some clients who are preparing their properties for sale, as is traditional for spring. It will take some time for these homes to come to market, which could lead to a later than normal spring resurgence.  There are early signs that listing numbers are rising and we expect this to continue as the weather improves” 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 in line with the mix of properties selling in upper or lower price brackets. The average sales price for the Wellington region in September was $453,023.

Christchurch
There is currently not enough sales evidence within the Christchurch region to draw conclusions on value trends post-earthquake. QV’s Residential Price Index for August (pre-earthquake) showed that property values in Christchurch had begun to ease for the first time since February, after increasing steadily through 2009.

Consequently, values at the end of August sat 3.2% above the same time last year, and 4.7% below the market peak of 2007.

Mrs. Melanie Swallow of QV Valuations said; “For the first few weeks post-earthquake, the property market was static as people took stock of things.  A month on and signs of normal market activity are beginning to emerge, with an increase in buyer enquiry and demand for quality housing. This is bearing the signs of a seasonal spring market that we were anticipating pre-quake. In following the national trend, house prices are still behind their peak levels, although there has been some recovery. It can still be seen as good time to buy or trade up, particularly with prices and mortgage interest rates at their current levels”.

“Although we lack enough sales evidence to comment on value trends post-quake, historical evidence from other events in New Zealand, such as the Gisborne earthquake, show that after the initial taking-stock phase, parts of the market where housing stock is not affected tend to carry on” Mrs. Swallow said.

“It is taking slightly longer at present to put property deals together in light of additional requirement for dwellings to have post-quake Structural Engineer Reports. Purchasers are also taking more time with their due diligence. However, it is still very positive to see normal market activity resume, with some healthy asking prices being achieved” Mrs. Swallow 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.

Dunedin
QV’s Residential Price Index for Dunedin shows that property values in Dunedin are beginning to stabilise, although have decreased by 1.6% since March this year. In contrast, values increased by 3.1% in the 7 months to March.

Consequently, values now sit 1.5% above the same time last year, but 5.3% below the market peak of 2008 as the graph below illustrates:

Mr. Tim Gibson of QV Valuations said; “The flat residential property market that has existed over the Dunedin winter period has continued for the month of September. Sales volumes continue to remain low with little evidence of a spring resurgence. However, there are reports of increased interest at open homes during September, which may be a sign of more sales activity in the near future”.

“Well presented properties are still selling in reasonable time frames, although those which lack appeal due to deferred maintenance are difficult to shift. This is typical for a subdued residential market, as capital gains obtained from a quick tidy up of a property are not as easy to realise as in past times” Mr. Gibson said.

“The market for family homes is the most active part of the wider market, but there have been some reports of greater residential investment activity recently, especially within properties involving student rentals” Mr. Gibson said.

“Values still remain 5.6% above the low point in the market measured in March 2009. All areas of Dunedin City are displaying similar levels in their annual value change. This indicates that no suburb or value-bracket is performing any better than another within Dunedin City” 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 September was $274,112.