Monday 12 July 2010
Property values continue to ease
Property values across New Zealand have continued to slide in recent months according to the QV residential property indices for June.
Values are still above the same time last year due to increases in the second half of 2009, but the recent declines are closing the gap. Values are now 5.2 percent above last year, down from the 5.6 percent reported last month.
While values have declined according to the index, the average sales price increased very slightly from $403,070 to $404,715. This is due to a change in composition of the sales taking place, and shows the unreliability of using average sales prices to measure value change.
Glenda Whitehead of QV Valuations said “the number of sales transactions remains at relatively low levels and are currently around 20 percent below the long term average. There is typically a decline in sales activity at this time of the year as winter sets in”.
Whitehead said “there also appears to have been an easing in the number of new properties coming on to the market, which is a normal trend for this time of the year. There is still plenty of choice for the few buyers actively searching”.
“There is no evidence so far that the budget has had any dramatic impact on the property market. Any changes, if they are to happen, will likely take effect over the next twelve months as the various tax changes are implemented, and will also depend on whether investors decide to sell as a result of the changes”.
Whitehead said “buyers continue to be very cautious and selective in their purchasing decisions. Properties with perceived flaws such as structural problems, or poor maintenance, or perhaps at a greater distance from town, are proving harder to sell”.
“There are still sellers who have unrealistic price expectations in the face of present slow market conditions. These properties are being bypassed by purchasers, whereas those priced appropriately are more likely to attract attention”.
“Distressed sales are still having an impact on the market. The effect is that where they are available, and potentially cheaper than non-stressed sales, they are subduing price levels in those areas” said Whitehead.
In most of the main centres values have declined in recent months, and while still above last year, the gap is closing.
Across the Auckland area values are 7.9 percent above last year, down from the 8.8 percent reported last month. The Wellington area has also slipped to 4.1 percent and Christchurch to 5.9 percent.
In contrast to the other main centres, both Hamilton and Tauranga showed a slight increase in the gap between values this year and last year. This reflects that values in both cities have been relatively static for most of the last twelve months, with neither showing any significant increase in the second half of 2009 like the rest of the main centres did.
The gap in values over the last year has also grown in Dunedin from 4.8 percent reported last month to 5.8 percent this month. Unlike most of the other main centres values in Dunedin have not consistently decreased in recent months.
The gap in values over the last year is also closing in most provincial centres due to declining values in recent months.
Whangarei (-1.1 percent), Rotorua (-2.1 percent) and Gisborne (-0.9 percent) all have values below the same time last year.
New Plymouth (6.2 percent), Palmerston North (4.9 percent), Nelson (5.1 percent) and Invercargill (4.3 percent) are still above last year, but the gap is closing.
Wanganui (2.3 percent) and Queenstown Lakes (0.8 percent) are only slightly above last year.
Values in Napier have continued to consistently increase in recent months and remain 6.4 percent above last year.
Annual Property Value Change
Average Sales Price
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Main urban areas commentary:
Property values in the Auckland region increased by 7.9% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), down from the 8.8% annual growth reported in May. The average sale price for the region increased from $534,639 to $537,412.
Glenda Whitehead of QV Valuations said; “Although our QV statistics show the annual change is positive, residential property values throughout the Auckland region have stabilised or slightly reduced in recent months. This is confirmed by the gradual reduction in annual growth since the start of the year. In contrast, average sale prices have been jumping around, suggesting patchy market activity in different locations and in different price brackets”.
“Since the start of 2010, the market has lacked the positive drive felt in 2009. As we continue into the year, our earlier anecdotal readings of a cooling market are now confirmed by hard data. The continued lack of demand from purchasers has set the trend for the time being. Sentiment is fragile, and the behaviour patterns of both vendors and purchasers are fickle. The wait-and-see approach, seen in the latter part of 2008, appears to be back” Ms. Whitehead said.
“Agents are reporting a lack of new listings, and much of our market valuation work relates to people refinancing, rather than with an intention to buy or sell. This suggests owners are just rolling-over their present situations. Following on from this, our work relating to extensions and alterations, or new builds, has picked up since the beginning of the year” Ms. Whitehead said.
“QV valuers continue to note significant levels of mortgagee sales. While these tend to reflect people who missed payments 6 to 12 months ago, it also shows that the green-shoots market recovery in 2009 was not enough to help some to recover their positions. Job retention and income levels are obviously a factor here too, emphasising that our economy is not out of the woods just yet” Ms. Whitehead said.
“In West Auckland, the market appears to have eased slightly, but not drastically. SOLD signs continue to pop up, so some sellers and buyers are still coming to an agreement. At the same time however, we have noticed some properties on the market for 2 to 3 months with no outcome. Asking prices here are probably on the high side. We have a number of clients who are first home buyers looking in the $360,000 to $420,000 range. They appear to be doing their homework, but like most, they are not in a hurry. The high end of the market ($700,000 to $1,200,000) appears to be a bit slow at the moment and we are not seeing much activity from investors. A similar tale can be told for other parts of the city” Ms. Whitehead said.
“Moving forward, we expect to see a build-up of latent demand from buyers and sellers biding their time. This indicates that at some point in the short to medium term, we might see another burst of activity or catch-up, once positive indicators are more widely spread. With plenty of negative talk at present, and a hangover from the 2008 fall, cautious behaviour sets future tone. The market will probably continue to plod along fairly sluggishly over the next 3 to 4 months, with perhaps a lift in spring” Ms. Whitehead said.
Property values in Hamilton increased by 2.2% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), up slightly on the 1.7% annual growth reported in May. The average sale price for the city decreased from $350,722 to $347,283.
The slight increase in the gap in values between this year and last year does not reflect a market recovery. Unlike most of the other main centres values in Hamilton did not increase significantly in the second half of 2009. Instead values have been more or less static for the past year and small variations can lead to changes in the year on year gap.
Mr. Richard Allen of QV Valuations said; “Residential property values in Hamilton City have shown some resilience with this slight increase in yearly growth, after three consecutive months of decline in our year-on-year measure”.
“During June, Hamilton’s South East was the only part of the city where annual growth slowed further, following the trend of the previous 3 months. Throughout the rest of the city, growth increased. The largest increase in this annual change was in South West Hamilton which increased from 0.9 % to 2.8%. The Central City/North West area increased from 0.5% to 0.6% and the North East from 4.2% to 4.8%.”
“Although the residential property growth statistic exhibited some resilience, the average sale price for the city decreased again from $350,722 in May to $347,283 in June. It appears that uncertainty in the economic recovery coupled with the speculation that there will be another increase in interest rates is continuing to dampen demand and stifle the residential market in Hamilton” Mr. Allen said.
Property values in Tauranga increased by 0.7% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), up slightly on the 0.4% annual growth reported in May. The average sale price for the region increased from $409,376 to $413,957.
The slight increase in the gap in values between this year and last year does not reflect a market recovery. Unlike most of the other main centres, values in Tauranga did not increase significantly in the second half of 2009. Instead values have been more or less static for the past year and small variations can lead to changes in the year on year gap.
Mr. Shayne Donovan-Grammer of QV Valuations said; “There is a sense that buyer enquiry has increased as they get organised to re-enter the market. Buyers are still cautious and are very dismissive of property which has any shortcomings. It is surprising that recently so much property has hit the market looking tired when a small amount of attention would increase both value and saleability. Making a property look its best for sale is now more important than ever. Sound property, well marketed and priced realistically, is steadily selling, particularly in the under $400,000 bracket”.
“The first home buyer loan scheme through Housing New Zealand is starting to play a more important part in the market. Access to low or no deposit loans has broadened the buyer pool and in a small way helped to generate much needed activity. There is a shortage of stock in the $250,000 to $320,000 bracket across most of the city. There is also a shortage of stock in the well regarded suburbs of Matua, Pillans Point and The Avenues in the $400,000 to $500,000 bracket” Mr. Donovan-Grammer said.
Property values in the Wellington region increased by 5.4% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), down on the 6.0% annual growth reported in May. The average sale price for the region increased marginally from $454,625 to $455,134.
Mr. Pieter Geill of QV Valuations said; “The recent trend of sliding values continues into June. We are hearing of reduced numbers of listings coming to market, but generally speaking, there still seems to be a relatively healthy number of homes on the market in and around Wellington to keep things ticking over”.
“Most of the valuation work completed lately is for people refinancing their homes. Perhaps most families are in a phase of consolidation and saving, assessing their future before making any major decision. Surprisingly however, we are fairly busy completing valuations for buyers, which we wouldn’t normally expect given the subdued state of the market. A number of sellers also seem to be seeking valuer advice before going to market, perhaps a reflection of their desire to meet the market and entice offers” Mr. Geill said.
“The foul weather throughout June probably hasn’t helped activity, and neither has the traditional winter wind-back. But not all areas are being affected by this. For example, Petone in Hutt City is still attracting strong buyer demand. Open homes are drawing crowds in comparison to other Hutt suburbs, despite the weather. When looking at a local level, it is a bit of a mixed bag in terms of demand and activity” Mr. Geill said.
Property values in Christchurch increased by 5.9% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), down slightly from the 6.2% annual growth reported in May. The average sale price for the city increased from $359,597 to $364,131.
Melanie Swallow of QV Valuations said; “The budget announcements have had little effect on residential market activity at this point. Whilst completing market valuations for our investor clients they have indicated the intention to hold their portfolios for the time being”.
“Year-on-year value growth has slowed since May. This is because the recent value slide is working against a rise in values at the same time last year. This is being further driven by a low sales volume which is typical at this time of year” Mrs. Swallow said.
“The lifestyle sector of the market is very flat with a very low sales volume. Purchasers are weighing up the additional living costs of a lifestyle property, including commuting costs against urban based property. The decrease in house prices makes urban living more affordable at present” Mrs. Swallow said.
“Anecdotal reports from agents have indicated that vendors are making small reductions in their asking prices, although there is still divergence between vendor and purchasers expectations. Vendors are slowly accepting that there is plenty of competition in the market when competing for buyer dollars. If a property has any negative characteristics, or is not sharply priced, they can expect their property to sit for some time. Purchasers are being extra cautious and picky. This could be driven in part by tighter lending policy from financial institutions” Mrs. Swallow said.
“Builders report a small lift in activity, with people wanting to build now to avoid an increase in pricing from the rise in GST as of 1 October 2010. An increase in GST from 12.5 per cent to 15 per cent would add $6250 to the price of a new $250,000 home. Apart from a small increase in activity in the market for new homes, activity generally remains subdued” Mrs. Swallow said.
“The average sale price showed a small lift of $4,534 up from $359,413 recorded in May to $364,131 in June. This result does not indicate a recovery. The average sale price is easily skewed by a lower sales volume and the sale of higher priced properties in this period” Mrs. Swallow said.
Property values in Dunedin increased by 5.8% over the past year (calculated over the three months ending June 2010 in comparison to the same period last year), up on the 4.8% annual growth reported in May. The average sale price in Dunedin increased from $269,848 to $278,475.
The increase in the gap in values between last year and this year is due to variability both in recent months and the same time last year. Unlike most of the other main centres where the year on year gap is closing, values in Dunedin have not consistently declined since the start of the year.
Tim Gibson of QV Valuations said; “Values are now 7.6% above the bottom of the market in March 2009. This compares favourably with Christchurch which is showing a 6.9% increase over the same time. However, recent activity in Dunedin’s residential market has been subdued. This can be seen as a typical winter selling period, with lower sales and listing activity evident.
“Generally speaking, demand still exists for well presented properties, with many of these selling fairly quickly if vendors’ pricing expectations are realistic. Comments have been made that buyers are becoming pickier on the property they purchase. If a property has any major detrimental issues such as deferred maintenance, it is not selling as quickly as neatly presented homes” Mr. Gibson said.
“Interestingly, the top end of the property market is showing some activity, with four houses over $900,000 sold in June. These higher level sales will account for some of the increase in the average sale price shown for the month of June” Mr. Gibson said.
“All four sub-areas of Dunedin which QV monitors have experienced a small increase in annual growth since May. The area of Peninsular Coastal Dunedin has shown the most at 1.4% from the previous month, while the Taieri area has shown the smallest at 0.1% from the previous month. Given the softness of the current market, this is more likely a continuation of flat growth rather than the start of a recovery” Mr. Gibson said.