Nationwide residential property values surged ahead in the year to December 2015 at a rate of more than 10% faster than for the same period the previous year.
Overall the nationwide average shows residential property values increased 14.2% or $69,472 during 2015 from $488,674 in December 2014 to $558,146 in December 2015, according to the latest statistics from Quotable Value (QV) powered by CoreLogic.
The average national value increased 2.9% over the final three months of 2015 and nationwide values overall are now 34.7% higher than the previous market peak reached in late 2007.
Home values in the Auckland region increased 22.5% or $171,406 from $761,858 at December 2014 to $933,264 at December 2015. They rose 4.1% over the past three months but only 0.2% over the final month of the year. They are now 70.8% higher than the previous peak of 2007.
Sales volumes were also up on 2014 for much of year with the exception of January 2015 reversing the trend of historically low levels seen since the GFC. March 2015 had the highest number of sales at over 10,000 residential properties sold in that month.
CoreLogic research also shows there were also changes in who was buying property during 2015.
QV National Spokesperson, Andrea Rush says, “Massive increases in Auckland home values during the first nine months of 2015, at a rate not seen since the early 1990s, led the Government and the Reserve Bank to announce mid-year that they would introduce measures to curb Auckland investors.”
“These huge hikes in home values and pending restrictions on investors saw many look to move or invest outside of the Auckland region for more affordable homes or better rental yields during 2015.”
“This resulted in an increase in activity and demand in previously slow housing markets in upper and central North Island centres including Hamilton, Tauranga, the Waikato District, Hawkes Bay, Whangarei and Rotorua.”
“Following the introduction of the new measures in October and November, the rate of growth in the Auckland market slowed, while values in many other centres including Wellington and Dunedin saw significant value increases in the three months of the year.”
“However, the Christchurch market remained relatively steady during 2015 as supply of homes from the rebuild met demand for housing in the city meaning values there increased only moderately over the past year.”
In the Auckland region, the Papakura District values increased the most with home values rising 29.9% year on year as Aucklanders looked further out to the Super City boundaries to find an affordable entry into the market. Manukau City suburbs saw the second largest year on year increase rising 26.3%; while Waitakere City homes values were close behind rising 25.6%.
Home values in North Shore City increased by 22.0% in the year to December 2015; while the former Auckland City Council suburbs increased 20.7%; Franklin District values rose 20.0% and the Rodney District saw values increase 18.8%.
Home values in Hamilton City also surged ahead during 2015 up 19.5% year on year and 6.7% since October which was a slightly slower rate than the previous two months so the rate of value increases there now appears to be starting to slow a little.
Tauranga home values continue to rise quickly, up 18.2% year on year and 7.8% over the past three months of the year.
Home values in Wellington City also started rising at a much faster rate over the past three months of the year than they have since before the previous peak of 2007. They increased 5.2% year on year to December and increased 4.3% since October after showing a slow but steady upward trend over the earlier months of 2015.
Christchurch City home values increased the least out of all the main centres during 2015 up 2.6% year on year and 1.5% over the final quarter of the year.
Dunedin City home values rose at a moderate rate of 5.7% year on year and 2.1% over the last three months of 2015 which is faster than the market there has risen at any time since the previous peak of 2007.
District and Provincial Areas
Many of the North Island provincial centres on the outskirts of the Super City and also within close proximity of Auckland began to see significant value increases during the middle of the year as more buyers turned their sights outside of the over-heated Auckland market.
The Waikato District saw values rise 19.9% in the year to December; the Hauraki District increased 14.0% and values in the Waipa District also rose 12.0% year on year.
Whangarei District and Queenstown Lakes District also saw values up significantly rising 12.9% and 12.1% respectively and the Queenstown Lakes District now has the highest average value in the country outside of Auckland at $776,671.
Values in all other districts and provincial centres also rose over the year with the exception of the Ruapehu District in the North Island and the Grey, Buller, Clutha and Gore Districts in the South Island.
The West Coast of the South Island saw the greatest declines in value following tough times in the coal industry and the closure of some mines in the areas. Buller District values decreased 9.9% and the Grey District was also down by 6.2% in 2015.
First home buyers returned to the market in 2015
CoreLogic’s buyer classification analysis shows what type of buyers are purchasing properties, including first home buyers, movers, and multiple property owners.
The most active group of buyers, particularly in Auckland, are those who own multiple properties - mostly investors. Their share of sales has increased from 35% in 2013 to a peak of 40% in the second half of 2015. The increased activity by investors was likely a contributor to the Government and Reserve Bank putting in place measures during 2015 to slow down investor activity.
Another trend during 2015 was the return of first home buyers to the market. Back in October 2013 the Reserve Bank put in place the Loan to Value (LVR) speed limits which limited banks’ lending to customers with low deposits. That had the effect of decreasing the first home buyer share of sales in Auckland from 23% in mid-2013 to 19% by mid-2014.
CoreLogic’s Director of Research, Jonno Ingerson says, “Now first home buyers are finding ways back into the market either by saving for a larger deposit or lowering their price expectations. As a result the share of first home buyer sales is now back to 23% and climbing. The story is similar outside Auckland.”
“Another clear trend in the types of buyers active in various markets was the spread of Auckland people and money to the surrounding areas. From the buyer classification analysis we can see people’s movement patterns. During 2015 there was an increase in Aucklanders moving to Hamilton, Tauranga and Waikato District.”
In Hamilton during 2015, 22% of the sales to movers were to those who had just moved from Auckland. This is up from 13% in 2014.
In Tauranga this movement of Aucklanders has been increasing steadily since 2012 when they accounted for just 12% of movers, increasing to 30% by the end of last year.
Ingerson says, “Waikato District, which stretches from the southern boundary of Auckland south to Hamilton City has been a popular part of the country for Aucklanders to move to. With improved state highways it is possible for these people to still work in Auckland but to live somewhere much cheaper. Since 2009 the percentage of movers to Waikato District being from Auckland has climbed from 20% to 46% in 2015.”
“Not only are Aucklanders choosing to cash up their properties and move to a cheaper town, but they are also increasingly investing elsewhere, chasing better rental yields and more affordable properties.”
In 2014, 6% of all purchases in Hamilton were by investors who already had properties elsewhere in the country and were buying a Hamilton investment property for the first time. The vast majority of these were Auckland investors starting up in the Hamilton market. In 2015 this increased to 14% of all sales in Hamilton.
Likewise in Tauranga where 10% of 2014 sales were to investors buying in Tauranga for the first time, this increased to 13% at the end of 2015.
“There has been anecdotal evidence of Auckland investors being increasingly active in Wellington but there is little evidence in the data to support that currently” says Ingerson.
The outlook for 2016
Ingerson says, “Overall, the outlook for 2016 looks positive for most of the country with transaction numbers picking up and values increasing in many areas outside Auckland.”
“With the various Government and Reserve Bank restrictions now beginning to take effect, and foreign buyers apparently much less active, our expectations are that Auckland values will drop a few percent over the next few months.”
“However mortgage interest rates are at historic lows, migration at historic highs, and there is a substantial shortage of housing in Auckland. These are strong factors putting upward pressure on Auckland prices, and as a result any drop in values is likely to be shallow and short-lived.”
“While Auckland may take a breather, the surrounding areas are likely to continue to rise, driven both by local demand and by Aucklanders choosing to move to more affordable locations. However the value growth we saw in Hamilton in late 2015 of more than 10% per quarter will not continue, instead settling back to a more moderate rate of value increase. Most of the top half of the North Island will continue to increase likewise.”
Ingerson says, “It will be a more variable outlook further south where the effect of Auckland is far less. Wellington values have been accelerating from the past few months and that will continue in a market where current demand is outstripping supply. Dunedin will also continue to increase, while Christchurch is more likely to stay flat.”
The easing of the LVR restrictions outside Auckland will be a key contributor to strength in these markets as it will allow more first home buyers and potentially upgraders to purchase.