Dwelling Values Stagnate Across All Main Centres

Date: 03 July 2018

According to the June QV House Price Index, utilising data and methodology from CoreLogic, none of the main centres saw growth in values of more than 0.5% since May’s index.
Values in Dunedin, where growth has consistently been very strong compared to the other main centres, even saw a significant reduction in growth, with the change from May only +0.3%. 
Three of the six main centres saw very minor value drops in the June results, with the Auckland, Tauranga and Christchurch indices all dropping 0.1%. Values in Christchurch remain 0.3% below the same time last year.
Wellington City values bounced back according to June results – up 0.4%, after dropping 0.9% at the end of May. Values remain 1.3% lower than they were at the end of March however, as reduced demand and credit unavailability hinders the amount buyers can pay in a city where the average value hovers above the $750,000 mark.
This market weakness appears to be spreading to the Hutt too, with values in Lower Hutt only increasing 0.6% since the end of March. For now, Upper Hutt is still seeing more considerable growth, 1.9% over the same period, however this is well down on the 3.5% rate at the end of April 2018.
Meanwhile the highest annual rates of growth remain in many of the regional markets, however these rates of growth continue to slow and the outlook appears to be uncertain. CoreLogic head of research Nick Goodall said, “Further investigation into the regional composition of overseas migration into NZ reveals that provincial centres seem to suffer disproportionate outflows when overall net migration losses from NZ are high. With net migration tipped to continue to fall, including the balance with Australia, the provinces may feel this more acutely as fewer people arrive and more people leave the regions.”
Across the other Main Urban Areas, Napier retains top spot, with the greatest annual growth – although this has dropped for the second consecutive month, down to 15.7% at the end of June, compared to 17.6% at the end of April. Nearby Hastings has seen a similar slowdown (from 12.5% at the end of April to 8.5% at the end of June).
With consistently strong annual growth, exceeding 15% for the last two years, and an average value exceeding $510,000 now, unaffordability will be starting to have an impact on the region’s property values, especially with credit remaining tight. 
Only four of the twelve main urban areas (outside the largest six cities) saw annual growth increase in the June figures.
Whanganui was one of those, with annual growth hitting 12.6% in the year to the end of June 2018. The lower average value of property here remains an attraction for owner occupiers and investors alike. 
The other three areas with a similarly lower value profile, were Invercargill, Palmerston North and Rotorua all of which saw a lift in annual value growth from May to June. Gisborne was the only city which recorded an average value lower than any of these areas, and annual growth slowed from 10.1% to 8.9% over the month of June. 
New Plymouth remains an area of interest, as anecdotal reports of local discontent increase in response to the Government announcement of no new oil and gas exploration permits being granted. Values in New Plymouth continued to gradually grow, with the average hitting $450k at the end of June, however the future is more uncertain. Mr Goodall said this is especially true when considering the regionally supported dairy industry which also faces a challenge in retaining the kiwi ‘100% pure’ branding in the face of the mycoplasma bovis infection. 
He said, “Overall, the New Zealand property market continues to be constrained by tighter lending criteria, despite short term interest rates remaining low. 
“The banks continue to be very competitive when it comes to the shorter term interest rates, but with market activity still weak, they’re clearly keeping criteria quite strict.”
Market activity, as defined by valuations ordered by the banks to support loans, ended the month 10% below the same month last year. This measure acts as a very good predictor for sales volumes and indicates another slow month of sales volumes is likely to be reported over the coming weeks and flowing into July.
Mr Goodall said, “Looking longer term we’re predicting a fairly uneventful six-to-eight quarters of sales volumes, mostly tracking sideways from the four quarters.”
“This is due to a period of relatively benign movement in the factors that typically influence demand. Both GDP and wages are forecast to grow steadily, and mortgage interest rates are likely to remain low.”
Migration in New Zealand is forecast to reduce, which would further reduce property demand but not at the same rate as previously thought, as demand for skilled labour remains high. This is especially the case with the KiwiBuild targets and the recent announcement of the “KiwiBuild Skills Shortage List”, designed to provide an expedited process to fill specific roles which will further slowdown that proposed migration drop.
In summing up, Mr Goodall said “There’s no doubt we’ve gone past the peak growth phase of the most recent property cycle. The question now turns to how long the lull will last and whether it will be more than a lull. Given we’ve seen no discernable change in investor behavior, any improvement to supply will be a long term game (even taking into account current record building consents) and mortgage interest rates are set to remain low we think any drop will be shallow for now.”

Tags: QV House Price Index, New Zealand Property, House Values



Andrew Carney (New Zealand)
04:02 AM 04 July 2018
How much has Napier risen in the last month?