Tuesday, 11 September 2012
Christchurch property market update
With the second anniversary of the September quake having just passed, the Christchurch property market is showing little signs of slowing. This is despite the initial “haze” that was caused, especially between the September 2010 and February 2011 quakes, having now cleared and residents have started to reconstruct their lives and their homes.
Changing values across Christchurch
Although we do not have a house price index defined by zone or suburb groups within Christchurch, another effective way of measuring changes in property value is by comparing the sales prices to capital value (CV). The CV, also sometimes called the rating value, is used by the Council to allocate rates. It was last assessed in Christchurch in August 2007.
For each area we can compare the average difference between the sales price and the CV. A median or average sales price can be biased if the makeup of sales changes over time. For example if more high value properties are selling then the median and average will rise. Using a ratio of sales price to CV overcomes this potential bias, and is actually the basis for our house price index methodology.
When we look at the comparison of sales price to CV we can see how values in different parts of Christchurch have been tracking from before the first quake through to now. Like the rest of the country, in the months preceding the quakes values in Christchurch were dropping (as too were the number of sales). However, since February 2011 values have been increasing steadily, particularly in the west where they are now sitting around 9% above CV.
Unlike the west, which was largely unaffected, the eastern suburbs were hit hard in both quakes. This led to increased demand for properties in the west from both displaced residents and people coming from outside the area. In contrast, the Port Hills area, which was hit very hard, slowed down considerably, particularly after the February quake.
Having caused a shortage of properties, and an intense sellers market in the west, it is little wonder that this area has seen the most rapid increase in property values compared to the other areas, and is consequently driving the total value increase across the Christchurch region.
Shortly after the quakes, CERA began to classify properties by zone, basically indicating whether the land was suitable to build on again or not. The Red Zone was indicated as not to be built on again, the Green Zone able to be built on again. The Green Zone was subsequently divided even further to reflect the level of foundation strengthening required before it could be built on again.
In short, these three Technical Categories were:
- Technical Category 1 or Grey Zone, whereby future land damage from liquefaction is unlikely
- Technical Category 2 or Yellow Zone, whereby the land had minor or moderate land damage
- Technical Category 3 or Blue Zone, whereby there was moderate to significant land damage.
Using the same method of comparing sale price to CV, we can see how values have changed over time in each of these technical categories.
It is not surprising that values have been increasing relative to the amount of damage and work needed within the technical categories. With the Grey Zone requiring the least amount of work, and future damage seemingly unlikely, values have been increasing the quickest.
Values in the Yellow Zone have been following close behind those in the Grey Zone, however, expectedly the Blue Zone, although starting off relatively flat, has started to decline now the requirements around this zone have become increasingly clearer. As a result, buyers in the area are starting to reflect this in the prices offered.
Outside of the Christchurch City area, values are also increasing, with the Waimakariri and Selwyn Districts especially seeing steep rises. Areas as far out as Timaru and Ashburton have also been affected, with the property values in these districts also rising, although not as rapidly.
Again, this is due to residents moving further away from unaffected areas and people, such as contractors, moving into the outer areas and commuting where necessary.
Sales and values by suburb
There is further variability when looking at property value change by suburb. Once we get down to this level, the number of sales starts to get low, and as a result the statistics can become unreliable. However the top twenty suburbs in Christchurch have had at least twenty sales over the past three months and so give a reasonably good indication of value change. Not surprisingly, many of these suburbs are in the west, rather than the east or Port Hills.
Some suburbs, such as Hornby, Bryndwr, Papanui, and Redwood are fetching higher prices in comparison to CV. Other areas are variable, with some like Woolston and Linwood achieving on average CV only, probably due to their eastern location.
The table also shows the percentage change in sales volume from the few months prior to the first quake compared to the last few months. The increase in number of sales is clear to see, particularly for popular suburbs in the West such as Hoon Hay, Northwood, Spreydon, Burnside, and to a lesser extent Halswell and Sockburn.
In contrast sales numbers have been more or less flat in Bryndwr, Parklands and Linwood. Also, although not shown in the table, many suburbs in the eastern suburbs have dropped dramatically, with sales volumes now half to three quarters lower than pre-quake.
||Number of sales
in 3 months
price to CV
|% change in|