Regional Predictions Become Fact

Date: 14 August 2018

As a property data research analyst, a personal goal of mine is to be able to predict market movements and forecast with certainty. However, with so many factors at play, the property market is certainly a tricky one to predict. For New Zealand’s regions - my expectations are becoming fact.

The regional property market slowdown is definitely continuing. As we saw in the the latest QV House Price Index (powered by CoreLogic data), ten of the twelve regions analysed experienced a decreasing annual value growth rate since the month beforehand. As I reported at the time of the index release, the easing of net migration will be impacting these markets, on top of tightening credit and recent value increases affecting affordability.

Invercargill and Palmerston North were the only two areas to buck the trend of declining value growth, but their performance isn’t exactly reason to celebrate, with value ‘growth’ of just 0.1%.

Even the top-ranked regional performer (the Art deco capital of Napier) is experiencing a slow-down: this Hawkes Bay hot-spot may have the strongest annual value growth of the main urban centres, but at 14.3% (end of July’s figure), that represents a significant fall from 17.6% at the end of April. Nearby Hastings has also seen a similar slowdown, dropping from 12.5% at the end of April to 8.4% at the end of July. The Bay is epitomising the expected regional slowdown.

In second and third place behind Napier are the lower value centres of Whanganui (11.2%) and Invercargill (9.8%), just slightly ahead of the higher value centre of Palmerston North, which recorded 9.6%.

Another lower value area we assessed was Gisborne. Here, values continue to slow, down from 10.1% at the end of May 2018 to 7.3% at the end of July. Gisborne is however lucky to have an underlying economy (with key industries of agriculture, forestry and viticulture all performing pretty strongly) which supports property values. ASB’s regional economic scorecard for the March quarter actually ranked Gisborne as a respectable 6th out of 16 regions. Gisborne’s tourism is also doing well, with guest nights hovering around record highs.

The New Plymouth annual value growth rate declined further to 5.3% amongst anecdotal discontent with regards to the governmental announcement of no new oil and gas exploration permits in the area.  Nelson comes in last with just 4.4% annual value growth: the higher average value ($559,023) is impacting affordability, especially with credit from banks remaining tight.

People’s inability to secure funding, especially at the higher end of the market is seeing less price pressure translate to minimal value growth. As we begin to approach spring, the question is whether or not the market will respond with increased listings.

On the subject of listings, in most regions outside Auckland, listings are at near all-time lows, which is contributing to the controlled slow-down in values, as active buyers still face competition for the few properties on the market.


Author: Nick Goodall, Head of Research, CoreLogic

Tags: NZ Property Market, NZ Property, Real Estate, Regional Areas


Comments:

1 Comments

len Pemberton (New Zealand)
09:46 PM 15 August 2018
Hi Nick, what happened to reporting on Rotorua?
We are truly a tourist hub and have 800 odd sections, coming to the Market.
Rotorua would dworf Gisborne for tourist numbers
Let’s not marginalise a growth city like Rotorua.