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Jonno Ingerson, Head of Research, CoreLogic NZ Ltd.
Auckland values have rebounded again after dropping for only two months according to the latest QV House Price Index release. The index had dropped in both January and February meaning that Auckland values had dropped very slightly by 0.8% from the December peak. However the latest results show that in March the index rebounded 0.6%.
I had been expecting a brief and shallow drop in Auckland values due to the new restrictions on investors and the dramatic fall in Chinese buyer activity since September. However I didn’t expect the drop to be quite this brief and shallow. That is making the assumption of course that this rebound in values in our largest city is going to continue. More on that later.
There had been an expectation that Auckland investor activity would drop following the rule changes, however it appears that instead they just spent a couple of months waiting for the dust to settle. Our buyer classification analysis has long shown investor activity in Auckland to be going from strength to strength. Their share of sales dipped very slightly for a couple of months late last year but they are now back in the market and they are now at 42% of all Auckland sales and climbing. First home buyers, who had been increasingly more active in the market for the past 18 months have dipped again since the New Year.
I know for many of you outside Auckland that all this talk about our largest city can get a bit boring. I get that, but I lead with it because Auckland is the market that the Government and Reserve Bank, economists, ratings agencies, and a raft of others are watching closely amid concerns of the impact on our economy of both continued rising prices and any subsequent major drop. And there does seem to be a continuing desire in some quarters to see value increases in Auckland curbed, potentially with more regulatory intervention.
But let’s turn our attention to the rest of our beautiful country. The rapid rise in values in Hamilton and Tauranga since about mid last year has been well documented. This increase in values has continued but at a slower pace than at the end of last year. In Hamilton the last three months have seen values increase 3.7% which is much slower than the 10.2% we saw in the three months to October. Likewise in Tauranga where the latest three months have increased 5.5% compared to 7.8% in December.
Both of these cities continue to see significant numbers of Aucklanders moving or investing there. Our buyer classification analysis shows 14% of the sales in Hamilton so far this year were to Auckland investors, which incidentally is down from a peak of 27% in late 2015. In Tauranga it is 12% and climbing. We[MJ1] can also see an increase in Auckland homeowners moving to Tauranga and Hamilton but the numbers are much lower.
Of course it’s not just those two cities seeing values driven up by Aucklanders. To the north of Auckland values in Kaipara have risen 6.8% in the last three months, and a slightly more sedate 4.0% in Whangarei. To the south it is Aucklanders and to a lesser extent Hamiltonians seeking more affordable properties helping to drive up values in Waikato District, Thames-Coromandel, Waipa, Hauraki, Matamata-Piako, and Western Bay of Plenty.
As we move further afield values in Opotiki, Rotorua, Napier and Ruapehu are all up around 4% while much of the rest of the central North Island is increasing but only very slowly.
The heat comes on again in the Wellington area, which some are describing as the new Auckland when it comes to property market fervour.
Over the past year the Wellington market has become progressively tighter as sales activity out-stripped the number of new properties coming up for sale. We now see the total number of properties listed for sale in Wellington being only half of what they were this time last year. This comes at a time when demand is astronomical with attendances at open homes in Wellington City by dozens or even hundreds of groups not unheard of, and multiple offers being made very quickly. Unsurprisingly values have been rising quickly since September, and over the last three months are up 4.2%. The rise in values in the Hutt Valley, Porirua and Kapiti Coast are slower but the demand is beginning to spread there as the city market heats.
The impact of Auckland investors is much less in Wellington than further north. According to our buyer classification only 4% of Wellington sales in the past three months have been to Auckland investors, up from the 2 to 3% we have seen for the past few years. First home buyers have remained steady at 26% for the past few months; meanwhile other investor activity has climbed further to account for 40% of all sales.
In a sign that it isn’t just the movement of Aucklanders causing values to rise, parts of the South Island are also on the rise. Nelson, McKenzie and Queenstown Lakes have all risen over 4% in the past three months, with Kaikoura, Central Otago and Gore not far behind.
Mine closures in particular have hurt the West Coast with values down 8.4% over the past year in Buller and 5.2% down in the Grey District.
The Christchurch market remains stubbornly flat despite most of the rest of the country beginning to rise. Christchurch City is up just 0.8% over the past three months, and the surrounding areas of Waimakariri and Selwyn which were very hot in the year or two after the major quakes have also been increasing only slowly. The lack of recent increases reflects a market that has returned closer to normality and suggests that the post-earthquake rise in values slightly overshot the true value.
Dunedin is also now on the rise after several years of dormancy but the rate of value growth at 2% per quarter is slower than most other main centres.
What then of the outlook? Migration continues to be strong, and is likely to stay that way for some time yet. A good chunk of that migration is kiwis either not going to Australia or returning home. This lack of people leaving for the ‘West Island’ is in part a contributor to regional market strength.
Meanwhile there is a building shortage in Auckland and the latest building consent statistics don’t look too promising for fixing that. While the headlines trumpeted the highest February since 2003, what they failed to mention was that building consents in Auckland have actually been trending down for the past few months according to Statistics NZ.
The fundamental drivers of high demand and low supply mean rising prices in Auckland. Then we have multiple reports of Chinese buyers getting active in the market again which will add a little more spice. That is why I expect Auckland values to keep rising although not at the frenetic pace of the past three years.
Buyer demand is another key thing to watch. Using our measure of valuations ordered by banks on behalf of their customers, this surged hugely in mid-February in Auckland to record levels following a very sluggish start to the year. Wellington has also surged in the New Year and has been at record levels for several weeks. But, and this is a big but, we have just had Easter. This cools things down every year as people disappear on holiday and usually that marks the start of the winter slowdown as demand steadily drops away until September. Will this year be any different or will the strong demand persist after Easter? I suspect the latter but we won’t see for another week or two as the first post-Easter data comes through.
Similarly, the number of new properties being listed for sale usually drops away quickly after Easter. There are already signs of that being the case and if so and demand remains strong then values will continue to rise.
My expectation is that with plenty of buyers out there, particularly in Auckland and Wellington who are now looking further out from the central areas that values will continue to rise throughout winter.
Wednesday, 6 April 2016 Home values continue to rise in many parts of New Zealand Read more
The latest monthly QV House Price Index shows that nationwide residential property values for March have increased 11.4% over the past year. Values rose slightly by 0.2% over the past three months and are now 35% above the previous market peak of late 2007. When adjusted for inflation the nationwide annual increase drops slightly to 11.3% and values are now 15.4% above the 2007 peak. The average value nationwide is now $559,492.
The Auckland market has increased 16.9% year on year, but has decreased by 0.2% over the past three months. Values there are now 70.4% higher than the previous peak of 2007. When adjusted for inflation values are 16.8% over the past year and are 45.5% above the 2007 peak. The average value in the Auckland region is now $931,061.
QV National Spokesperson Andrea Rush said, “Home values have risen in most parts of New Zealand in the first quarter of 2016 with the exception of the Auckland region where values have been on a slight downward trend over the past three months.”
“However, over the past few weeks activity and demand has begun to pick up again across the Super City and values have actually risen again over the past month by 0.6%, so it appears the downward trend may be coming to an end.”
“The strong upward trend in the Hamilton and Wellington housing markets is continuing unabated. While in comparison the Christchurch market remains relatively flat, rising only slightly. The Dunedin values continued to rise at a steady pace.”
“The latest CoreLogic buyer classification data shows 44.0% of sales in Auckland were to multiple property owners, 21% were to first home buyers and 24.0% were to those moving from one home to another.”
“Around the rest of the country multiple property owners accounted for 37.0% of sales; while 20.0% of sales were to first home buyers and 26.0% were to movers.”
“While CoreLogic statistics also show listings levels remain low in many parts of the country with the exception of Taranaki and Canterbury.”
While the overall figure for the Auckland Region was now 0.2% in the first quarter of the year, not all parts of the super city saw values drop.
Home values were down in the former Auckland City council central suburbs decreasing by 0.3% over the past three months. However, they increased by 14.5% in the year since March 2015 and the average value in this area is now $1,093,035.
Waitakere City home values also dropped 1.1% over the past three months but rose 18.1% since March last. The average value there is now $739,411. Values on the North Shore values were also down 1.1% in the three months to the end of March but rose 15.1% year on year. The average value there is now $1,077,459.
Manukau City bucked the downward trend it’s seen over the past couple of months and values started rising again by 0.5% in the first three months of the year and they were up a total of 20.9% year on year. The average value there is now just shy of $800,000 and is sitting at $799,700.
Meanwhile home values in the outer fringe areas of the super city continued to see steady value rises as they have done throughout the year. Papakura District increased the most, up 1.9% over the past three months and 27.4% year on year. While Rodney and Franklin continue to play catch up on more central areas; Rodney home values rose 1.8% over the past three months and 17.4% year on year, but values there are now 41.5% higher than the previous peak of 2007, which is well below the Auckland Regional average of 70.4%. Similarly, Franklin values were up 1.7% over the past three months and 19.2% year on year but are 49.1% higher than 2007 levels, much lower than the regional average.
QV Homevalue Registered Valuer, James Wilson said, ““The ‘wait and see’ approach which entered the market after new rules to curb investor activity is now subsiding and investors are beginning to re-enter the market.”
“Agents are reporting a shortage of listings and that well-presented, quality homes are selling well with strong prices being achieved. Properties which provide multiple consented income units are increasingly popular among both investors and owner occupiers.”
“Buyers appear willing to secure properties on an unconditional basis without always completing adequate ‘due diligence’. This market behaviour is considered highly risky and can leave purchasers exposed if something is wrong with the property.
“The outlying Auckland localities continue to remain popular amongst investors and owner occupiers alike.”
“However, investors are now placing greater emphasis on the long term rental returns over capital gains which indicates a shift away from a speculation based investment model and a return to traditional models governed by longer term investment returns.”
“The diminishing level of rental returns also continues to drive investors outside of Auckland in order to achieve desired returns and achieve lower deposit requirements.”
Home values across Hamilton City increased by 3.7% over the past three months and 23.3% year on year. The average value in the city now is $460,725. Values in the Waikato District also continued to accelerate, rising 7.0% over the past three months and 25.6% year on year. While home values are starting to take off in the Hauraki District (up 5.2%); and Matamata-Piako District (up 6.1%) since the beginning of the January.
QV Homevalue Hamilton Valuer, Stephen Hare said, “Hamilton City property market is still strong and home values are continuing on a steady upward trend and there’s a noticeable lack of homes listed for sale on the market.”
“Values growth has slowed in the new housing areas of Flagstaff and Rototuna as homes here are already at a relatively high price level and we are now seeing the value growth in the lower price bracket suburbs such as Fairfield, Claudelands, Dinsdale, Hillcrest/Silverdale and Melville.”
“In the regions, Paeroa is attracting interest from property investors but most sales are to buyers relocating from Auckland in search of a more affordable home.”
“There are a number of investors selling their investment properties in the town to first home buyers and this is creating a double edged sword as local tenants are finding themselves out of a home. This trend is creating a shortage of rental accommodation and is also pushing up rents in the Hauraki District town.”
“The property market throughout the Waipa District also remains strong especially in Cambridge and Leamington. The lack of listings is also a noticeable trend in these towns particularly in Leamington demand is strongest for properties in the $400,000-$600,000 price bracket.”
Home values in Tauranga City continue to accelerate rising 5.5% over the past three months alone and 22.6% year on year. The average value in the city is now $571,872.
Western Bay of Plenty home values also continued to see strong increases up 7.1% since the beginning of January and 18.7% year on year. The average value in the district is now $497,748.
QV homevalue Tauranga Registered Valuer David Hume said, “The Tauranga Market shows no signs of letting up with a large number of out of town buyers.”
“Agents are reporting that in many instances sale prices are continuing to exceed both their and vendors expectations.”
“There is a lot of activity in Omokoroa at present with a new twelve-lot subdivision at Kayelene Place recently selling out in two weeks at an average sales price of $295,000 for sections ranging from 750 – 900 square metres.”
The QV House Price Index for the entire Wellington region shows home values rose 3.1% over the past three months and 7.5% year on year. The average value across the wider region there is now $491,236.
Home values in Wellington City area increased by 4.2% over the past three months and 8.9% year on year. The average value there is now $593,060. Lower Hutt home values rose 1.8% over the past three months; while Upper Hutt was up 0.6%; Porirua also rose 2.6% while the Kapiti Coast was up 3.1% over the same period.
QV homevalue Wellington Registered Valuer Pieter Geill said, “The housing market across the Wellington region remains hot with continued strong activity, high buyer demand and value growth.”
“There is still not enough stock to meet demand from buyers and the number of homes listed for sale remains at only about 50% of what it was three years ago.”
“People are lining up to attend some open homes and buyers are finding that their offers need to be unconditional to be successful and it’s been reported that it’s often not the highest offer that wins, but the cleanest offer (with the least conditions) that vendors are accepting.”
“In the Hutt Valley and Tawa, properties up to $600,000 are selling well. Investors remain active but they are no longer making cheeky offers as they need to make serious market related offers to ensure they are successful.”
“Developers are actively looking for sub-dividable land in the Hutt Valley, but there is not much land available. Blocks of flats are selling very well. There are still Auckland investors present but most of the bigger sales this month have been local.”
“Offers are being made and accepted very quickly and there is a growing frustration from buyers who are missing out and putting their highest bid forward to try and avoid missing out.”
Home values in Christchurch City rose by 0.8% over the past three months and 2.9% year on year. The average value in the city is now $485,700.
QV homevalue Christchurch, Registered Valuer Damian Kennedy said, “The market has generally had little growth with exception of entry level suburbs, such as Linwood, Aranui, Wainoni and New Brighton as well as in other suburbs with high numbers of new builds. This growth appears to be a bit of catch up in the more affordable suburbs which have seen less value growth than suburbs that boomed after the major earthquakes.”
“In areas which sustained severe earthquake damage new builds have also stimulated market growth because new homes generally sell for a higher value than the previously older homes in that suburb. The more recent earthquakes did cause some damage to some areas only on a section by section basis. As it is not suburb wide damage it does not appear to have impacted on market activity as a whole.”
“Favourable market conditions such as KiwiSaver incentives, looser LVR restrictions and low interest rates continue to see first home buyers remaining active in the market.”
Home values in Dunedin are continuing to show strong and steady increases rising by 2.0% over the past three months and 8.1% year on year. The average value in the city is now $315,185.
QVhomevalue Dunedin Registered Valuer, Duncan Jack said, “Value levels continue on a steady upward trend and sales activity levels continue to be extremely buoyant with sale numbers only appearing to be restricted by the number properties listed for sale on the market.”
“Listing levels appear to be fairly static however buyer demand is very strong, with most buyers having strong intentions to purchase which is resulting in multiple offers scenarios remaining commonplace in the market.”
All sectors of the residential market are being affected by the increase in demand especially in the $200,000 to $300,000 price range but also the mid to upper ranges experiencing strong competition from buyers.”
“An increasing number of higher value properties appear to be coming onto the market for sale which suggests increased confidence in this sector of the housing market.”
“Anecdotal evidence suggests there continues to be good demand from out of town investors attracted by high yields as well as by those moving to Dunedin who appear to be attracted by the value for money and lifestyle which Dunedin provides.”
Napier home values are starting to accelerate rising 4.3% over the past three months and 9.1% year on year and average value there is now $358,732. While, Hastings increased by 2.6% over the past three months and 9.6% year on year. The average value there is now $331,149.
QV homevalue Hawkes Bay, Registered Valuer Bevan Pickett said, “The Hawke’s Bay market remains strong with properties selling quickly and there is a clear lack of homes listed for sale.”
“The lack of stock and high buyer demand means multiple offers continue to be common place and some properties barely make it to the market before being sold.”
“Local buyers have been forced into action by the presence of out of town buyers in the market who include investors and those relocating to live in the Hawkes Bay.”
“The low to mid-price-bracket is particularly active with out of town investors and they are giving strong competition to first home buyers, meaning those who were previously discerning in their decision-making need to loosen their criteria in order to secure a home.”
“Auctions and tenders are becoming more popular as the strength of sale tends towards the vendor and it becomes increasingly difficult to cap an asking price on a home given that values are rising quickly.”
Nelson home values are now rising quickly up 4.3% over the past three months. Values rose 8.9% year on year and the average value in the city is now $446,860. While home values in the Tasman District rose 1.1% over the past three months and 5.1% year on year.
QV Nelson Registered Valuer Craig Russell said, ““We have seen a continuation of a proactive market with properties selling in a short time frame with asking prices typically being achieved or exceeded.”
“It has been a strong start to the year in the region with the recent interest rate cuts and strong migration fuelling house prices.”
“There have been plenty of section sales occurring in recent months, which is partly due to a lack of listings of existing homes. Construction companies are expecting to be busy with new house builds as a result of the increased activity in section sales.”
“Investors remain active given the current low interest rates and relatively high yields compared to the main centres around the country.”
“A number of agents have switched to no price marketing which is another indication of a strong market given purchasers can be forced into a bidding war.”
Other Provincial centres
Many provincial centres are experiencing the fastest rate of home value growth since before the previous peak of 2007 including Whangarei, Napier, Rotorua, Taupo, Carterton in the Wairarapa, as well as the Central Otago and Queenstown Lakes Districts according to QV National Spokesperson, Andrea Rush.
“Regional areas within commuting distance to Auckland, Tauranga and Hamilton also continued to show significant value rises including towns located in the Waikato, Waipa, Hauraki, Western Bay of Plenty and Kaipara Districts.”
“The only areas to see a drop in home values over the first quarter of the year in the North Island apart from parts of Auckland were Otorohanga, Wairoa, South Taranaki and in the South Island, the West Coast districts of Buller and Westland as well as Ashburton and the Christchurch Hills suburbs.”
Thursday, 3 March 2016 Auckland continues its slideRead more
Jonno Ingerson, Director of Research, CoreLogic NZ Ltd.
Auckland values have dropped for the second month in a row according to the latest QV House Price Index. Meanwhile values across most of the rest of the country continue to increase.
Auckland values dropped a further 0.4% over the past month and are now down 0.8% from December 2015. Hardly massive decreases but definitely a change from what we have been used to.
While the drops are more marked in central and West Auckland, the heat is now coming out of the edges of Auckland too. While Rodney has not yet dropped in value, it has slowed, likewise Franklin in the South. Papakura meanwhile has dropped for the first time this month.
Has the cooling in Auckland spread out to the surrounding areas? You wouldn’t really expect it to; given the rule changes and lending restrictions are in part Auckland specific. North of Auckland values continue to rise at around 5% per quarter in Whangarei and Kaipara. Meanwhile to the South of Auckland there are just hints that the rate of increase may have eased a little. Across the Waikato and out to Bay of Plenty values were increasing faster towards the end of 2015 and have just slowed a little. For example, Hamilton was increasing at 10% per quarter in September and October and that is now back to around 5% per quarter.
It’s not just the areas surrounding Auckland that are increasing in value, we are now seeing values rising in most parts of the North Island. In most areas this comes after an extended period following the Global Financial Crisis of little or no value increases.
Wellington values began accelerating towards the end of last year and are up nearly 5% over the past three months. First home buyers are particularly active in the Wellington market and the lack of listings is making for a very seller friendly market and helping push up prices.
The South Island remains a lot patchier. Values have picked up in Nelson and Marlborough and are now increasing at over 3% per quarter, considerably faster than we saw last year. Central Otago and Queenstown Lakes have also accelerated with the latter now increasing at 6.1% over the past quarter, the fastest of anywhere in the South Island.
There has been a slight pick-up in the pace of increase in Dunedin, but only to 1.5% over the past three months, so nothing like the increases we are seeing further north.
Confidence is also returning to the Christchurch market, with sentiment largely positive, and undented by the latest quake. However values are not accelerating there yet, still increasing at less than 2% per quarter.
That’s what values have been doing over the past few months. But we have been watching other signs of market activity closely to see if the trends of late 2015 would carry through into this year. Would Auckland keep slowing? Will the surrounding areas remain hot? Would values increase across the rest of the country?
One of the best measures we have of market activity is based on demand from potential buyers. We measure this every week based on the number of valuations run by front line bank staff through the CoreLogic Valuation Ordering Service. The number of these valuations closely matches the number of sales that will subsequently occur. It is therefore a fantastic early measure of what market activity is about to occur.
Since last August this valuation activity in Auckland has been steadily dropping away, and we have subsequently seen how this turned into a slowdown in sales activity in Auckland. Meanwhile valuation activity in late 2015 was very strong in Northland, Waikato, Hamilton, and the Bay of Plenty and we now know this led to an increase in sales activity. Activity then drops over the Christmas break, so it isn’t really until February that we get a flavour of market sentiment.
By mid-February two things jumped out at us. The first was the dramatic increase in valuation activity across the Wellington area. The second was real weakness in the top half of the North Island. Not just Auckland, but the surrounding areas that were so strong pre-Christmas. It was beginning to look like the heat had come out of those markets too.
But then in the last two weeks of February there was a sudden lift in activity in the North. For two weeks in a row valuations were back to the peak levels from pre-Christmas. This coincides with word on the street in Auckland that activity has suddenly picked up, and intriguingly there are reports of Chinese buyers being back at the open homes in the North Shore after being largely absent since August.
There is a strong historical link between the number of sales and changes in value. When the number of sales drops, values drop a month or three later. When the number of sales increases, so too do values.
Valuation activity dropped in Auckland, then sales dropped, then values. So a sudden increase in valuation activity suggests an increase in sales, and therefore an increase in value. Of course this is only two weeks of data, but the turnaround is dramatic. Have we nearly seen the end of price drops in Auckland already?
It remains our view that Auckland values will not drop far and not for long. There remains high demand, driven by record high net migration. And contrary to what you might hear this migration is not ‘foreigners’ that the Government should stop. The biggest contributor to our high net migration is the relative weakness of the Australian economy. We normally lose tens of thousands of kiwis across the ditch. We are currently seeing a net gain as far fewer kiwis are moving to Australia, and high numbers are coming home. The last time we saw a net gain from Australia was in 1991 when the Australian economy was last in recession.
Over half of all migrants end up in Auckland where there is still a housing shortage. And the rate of house construction is not keeping pace with population increase. High demand with low supply means upward price pressure.
A price drop in Auckland of a just a few percent is more likely. Then the underlying drivers kick back in and prices start rising again, just not as quickly as they were before.
Meanwhile we would expect values to keep rising across most of the rest of the country, particularly in Wellington, where supply is well behind demand.
Bear in mind that since 1981 March has been the busiest or second busiest sales month of the year far more than any other month. We therefore expect market activity to be strong at this time of the year, usually right through until May. A lack of listings, evident across much of the country, is likely to help push prices up for some time yet.