Monday 9th February 2009
Property market continues to ease
QV's January statistics for the residential property market report a 8.3% decline in national property values over the past year (calculated using the QV index over the three months ending January 2009 in comparison to the same period last year), down further from the 7.4% decline reported last month. The average New Zealand sale price for January increased slightly to $382,762. Average sale prices have declined less over the past year (2%) than the QV index, as averages can be biased by the mix of properties selling at that time.
“The signs of a slight recovery in property values we saw at the end of 2008 have not continued into 2009, with the market dipping further. The number of properties selling remains at low levels which is also typical of activity around the holiday period” said Blue Hancock of QV Valuations.
“Declining interest rates would normally stimulate buyer activity, but concerns over job security, and a more cautious approach to lending by financial institutions seems to be preventing this. Many buyers also appear to be holding back in expectation of further property value and interest rates drops throughout 2009” said Hancock.
“Home affordability has definitely improved and there are good opportunities in the current market for those who can afford it, with motivated vendors and decreasing interest rates. We are also seeing more investors returning to the market, seeing better returns from cash flow in the current property market than returns from other forms of investment” said Hancock.
Most of the main centres are once again showing further declines in value compared to 12 months ago. The Auckland area has slipped back to -9.0%, Hamilton to -10.0%, and the Wellington area to -8.5%. Both Christchurch -8.8% and Dunedin -8.3% have also declined further. Tauranga was the only main centre to not decline further, remaining flat at -9.0% compared to last year.
As has been the case for several months, the provincial centres are showing variability. While all areas have values less than 12 months ago, Wanganui ( 4.5%), Nelson (-7.2%) and Queenstown Lakes (-8.5%) have all improved slightly over the last month. Invercargill remains static at -9.1%, while Whangarei ( 10%), Rotorua ( 11.9%), Gisborne (-10.6%), Napier (-9.1%), New Plymouth ( 5.5%) and Palmerston North (-10.2%) have all declined further.
Property Trends for Main NZ Cities
Auckland
Property values in the Auckland region declined by 9.0% over the past year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating further from the 8.0% decline reported in December 2008. The average sale price for the region increased slightly from $489,737 to $496,618.
Glenda Whitehead of QV Valuations said; “Property values continue to ease in stark comparison to levels this time last year. Some are feeling that values are now stabilising, but each area and type of property is affected differently. Generally speaking, values are definitely well down, presenting good buying opportunities. However, our current property valuation work indicates more people are re-financing their present positions, rather than moving property”.
“In the typical investor suburbs such as Otara, Manurewa, Papatoetoe and Mangere, property values have declined to levels where $220,000 will buy a well presented three bedroom home with garaging. Mortgagee sales have driven the low values in these areas. Buyers are bargain-hunting and unwilling to pay full price in these areas, as many believe there is no need to” Glenda said.
“Activity during this December and January season has been light as it typically is at this time of year. Although uncertainty remains in the property market, much of the focus has shifted to other demand-determining factors, like job security. Reduced interest rates are certainly a talking point, but we are yet to see increased buying activity as a result” Glenda said.
Hamilton
Property values in Hamilton declined by 10.0% over the past year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating further from the 9.3% decline reported in December 2008. The average sale price for the city increased slightly to $342,347.
Mr. Chris Coakley of QV Valuations said; “The brief optimism for a leveling in property values which was experienced towards the end of 2008 has not continued into the early stages of 2009. All areas of Hamilton city have had larger declines in January, with the exception of the Central City/North West. However, this area has been declining in value by 2-3% more than other parts of the city since October 2008, reflecting an over supply of stock in this area of the market”.
“Rapidly decreasing interest rates are taking pressure off those existing home owners with floating mortgages, and those coming off fixed term mortgages. However, buyers have more pressing concerns over job security and the economy in general; in the medium to short term lower interest rates are not likely to revive the housing market. Locally, the forecasted decrease for the milk-solids payout from Fonterra is likely to add to the downward pressure on values. Many Waikato towns and businesses are experiencing the effect of less spending in the local economy” Mr. Coakley said.
Tauranga
Property values in Tauranga declined by 9.0% over the past year (calculated over the three months ending January 2009 in comparison to the same period last year), holding steady on the 9.0% decline reported in December 2008. The average sale price increased from $429,370 to $437,612.
Mr Shayne Donovan-Grammer of QV Valuations said; “While values continue to ease there appears to be a little more activity taking place at present. Some well-positioned investors are starting to show interest in the property sector again, in comparison to 2008 when they were decidedly disinterested. It is possible that this attention is derived from lowering interest rates and the poor returns achieved from keeping money in the bank.”
“While more people are looking at the houses available for sale, this hasn’t necessary converted through to sales yet, as there is a belief that both interest rates and house prices will decline further. Under the current economic climate properties that have a good yield are the most saleable” Mr. Donovan-Grammer said.
Wellington
Property values in the Wellington region decreased by 8.5% over the past year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating further from the 6.9% decline reported in December 2008. The average sale price for the region increased from $415,811 to $431,088.
Mr Pieter Geill of QV Valuations said; “The levelling-off in the rate of decline of Wellington property values in late 2008 has proven to be temporary. At this stage it appears as though the steady decline of interest rates has done little to build a solid grounding for any sort of property market recovery in Wellington”.
“The continued limited volume of property sales seems due to a lack of buyers, rather than a lack of vendors. The positive effects of declining interest rates have been hindered by tightened bank lending requirements, which reflect the caution of the financial institutions. This makes it tough for anyone trying to enter the property market” Mr Geill said.
“There are good opportunities in the current market for those who can afford it, as vendors are motivated and interest rates are at low levels. Investors are also returning to the fundamentals of cash-flow, rather than capital gains” Mr Geill said.
Christchurch
Property values in Christchurch decreased by 8.8% over the last year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating further from the 8.0% annual decline reported in December 2008. The average sale price for the city decreased slightly from $348,953 to $347,157.
Melanie Holcroft of QV Valuations said; “The change in property values experienced between October and December 2008 showed that the rapid decline could be easing, but these latest figures show that the situation is still worsening. Average sales prices continue to decline; this could be influenced by low sales volumes and the mix of property being sold.”
“There have been anecdotal signs of an increase in investor activity, driven by decreasing property prices and lower mortgage interest rates. In short, if consumers have the equity or available funding it appears to be a good time to buy residential investment property” Ms Holcroft said.
“Overall the market has continued to soften, but at a slowing rate on those levels experienced in mid 2008. Lower interest rates have been slow to stimulate market activity, a pattern usually observed. This is attributable to a decrease in confidence in the employment market and rising food and fuel prices. We expect this pattern to continue for the next quarter” said Ms Holcroft.
Dunedin
Dunedin’s residential property values decreased by 8.3% over the past year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating slightly from the 7.7% decline reported in December 2008. The average sale price in Dunedin remained relatively steady at $254,088.
Mr. David Paterson of QV Valuations said; “The Southern City area continues the trend of the previous three months, showing the greatest rate of decline (-12.5%). This is in contrast to the Peninsula/Coastal area and Central/Northern City, which are showing a decline of 5.5% year on year. Agents are reporting increased interest from prospective purchasers, especially in the higher price brackets. There are reports that some vendors have pulled their property from the market, in the hope that the reduced interest rates will result in an increase in demand, and eventually prices”.
“The first home buyers market and investment market is still very sluggish with buyers continuing to take a wait-and-see approach in the hope the market will fall further. There is concern about long-term job security in the current economic climate, and this is also impacting on buying decisions. A continued ease in values, plus the expected further reductions in interest rates, should improve housing affordability. This will also make it easier for first home buyers to enter into the market, providing they have the funds available to meet the banks lending criteria” Mr. Paterson said.
View FAQ's about the Property ValueMap>