where is the property value growth coming from?
House prices have been rising steadily since earlier this year when they reached their low. According to our house price index values across the main urban areas are now 5.4% higher than they were in April 2009. But these increases in value aren’t occurring equally across the market. We’ve looked at some of the major cities to see how house prices have changed in recent months from the top end of the market through to the bottom end, and so uncover what’s driving values up.
For each city, every house was sorted into one of ten groups based on that house’s latest capital value. The top group contains the most expensive 10% of houses, and the bottom group has the least expensive 10%. The median sales price was calculated for each of these ten groups for the first quarter of 2009 (January to March) and then again for the third quarter of 2009 (July to September) and the percentage change measured. Note that this is for houses only, so doesn’t include apartments or flats like our monthly index stats do.
From the chart for Auckland City we can see that
values have increased by over 5% right across the market from the low end through to the high end. There is a hint that values have increased slightly more in the top half of the market than the bottom half, but it’s not a big difference. There has certainly been strong demand for property in the $600-900k bracket in suburbs such as Epsom, Mt Eden, Remuera and Ponsonby. These are typically second or third homes, of a family nature, with sought-after school zones. The one exception is in the group valued around $479k which showed only about 2.5% growth between Q1 and Q3. But notably, none of the value groups showed a decline in value. This is not the case for all cities as we will see later.
Things are a little different in Manukau City. 
Here the value growth has been more in the upper-middle part of the market (houses selling for between about $400k and $600k), and the most growth has been at the very top end of the market (houses over $800k). In contrast the lower end of the market has shown less growth, and house prices actually declined between Q1 and Q3 in the $260k group. Our QV valuers saw investors exiting the market as lenders tightened up, plus downward pressure on prices from a relatively high proportion of forced sales in that value bracket.
Hamilton City has been something of a mixed
bag, with few clear trends across the market. However, in contrast to Auckland City and Manukau the very top end of the market (over $500k) has gone backwards a few percent. Most of the rest of the market has grown around 5% with a couple of groups staying static.
In Tauranga, house prices at the very top end of
the market have taken a big dive, dropping 14% between Q1 and Q3. The recession hit this part of the market hard, and our local QV Valuers have seen demand evaporate. Owners who found themselves needing to sell simply couldn’t find the buyers. Most of the rest of the market has grown modestly with houses around $485k increasing 5% while the very bottom end of the market (under about $250k) is showing no change.
Moving further south to Wellington City and the
picture is similar to Tauranga, but less extreme. Prices at the top end of the market (over $800k) have dropped just under 2%, and at the bottom end (under about $350k) have remained static. There has been moderate growth across the rest of the market with houses between $350k and $500k growing around 3%. Houses around the $550k mark have increased in value the most as there has been strong competition in this part of the market and relatively few properties for sale. However at just over 4% this is still modest growth in comparison to some value groups in other cities.
There is a clear pattern of price growth in the 
lower middle part of the market in Christchurch, with houses in the range of about $260k to $330k increasing the most. The rest of the market has grown around 2% with the exception of the very top end which has stayed more or less stable. There is high demand and competition for the mid range properties, but very little interest in the top end where houses have tended to remain unsold for long periods of time.
In Dunedin there has been strong price growth
for properties around $270k. Much of the rest of the market has grown between 3% and 7% with the exception of top end houses (over about $450k) which have increased only slightly, and houses around $190k which have declined slightly. Like Christchurch, the top end of the market has suffered from a lack of keen buyers and has been slow to move.
And just to show that things are not increasing
everywhere, take a look at Queenstown Lakes. This is one of the few areas in the country that has continued to decline in value as the speculative highs of the booming market return to more realistic levels. The top end of the market (over $1m) has really taken a hit here.
So what does all this mean? Supply and demand are driving values differently across the market, and each area is responding to local factors. Generalised statements about the ‘NZ market’ will clearly not apply to everywhere. If your area is not shown above check out these other charts that cover more areas. Of course not all houses in an area will reflect the general trend. To get an instant estimate of the current value of your house you can purchase an E-Valuer report from QV.co.nz, or alternatively for complete certainty you can arrange for a QV Valuer to conduct a comprehensive market appraisal.