We enter the holiday period in a state of flux

Date: 14 December 2017

 
So the end of the year draws near! We’re starting to get a much clearer picture of where the property market is at, with a few months since Jacinda Ardern and Winston Peters signed their coalition agreement.
 
And the latest month of data, courtesy of the QV House Price Index (HPI), shows many parts of the country have experienced a late spring lift in values. It’s far too early to be calling it a resurgence but it’s hard not to notice the mini ramp-up in average values when you chart it over time. 
 
In Auckland this equates to a 0.4% lift over the last three months, but looking just at November values actually increased 0.7%, perhaps making up for the sustained previous period of no growth.
 
The question has to be asked at this stage whether the change has anything to do with the recently released new Rating Valuations (RV) for the Super City but previous experience and a quick look under the hood of the Index tells us this is not the case - it is after all designed to be unaffected by this process.
 
Spring finally announced its presence in November - both in our weather and property market patterns: perhaps this correlation isn’t a coincidence! If we look at consumer activity of people actually asking for mortgages, December has also started strongly (outside Auckland at least) so it looks as if those people who were unsure about the market throughout September and October have decided that things aren’t too bad and have re-entered the market. 
 
This is most evident in Wellington, where recent activity is sitting at 12% above winter levels, while Hamilton is following slightly further back on +8% . At first glance, this looks like a decent increase for Hamilton, but Hamilton didn’t experience such frosty winter activity, so it’s actually had a head start.
 
In addition to the activity lift, Wellington has also seen a value increase of 2.6% over the last 3 months, as reported in the QV HPI.  Listings in the Capital region remain at a near all-time low, with volume levels 5% down year-on-year and 31% down on the same time two years ago. This dearth of listings has counteracted the drop in demand.
 
Similarly, the Otago region is suffering the same lack of available properties - 38% less than two years ago. Once again this has led to an uplift in values, with Dunedin in particular up 2.8% over the last 3 months.
 
Outside our main six centres it’s very much a mixed bag in terms of recent value change, with no real consistency witnessed. And for those areas where value growth has persisted (including Napier/Hastings, Horowhenua/Kapiti and Nelson/Tasman), one of the key questions is whether or not it’s justified and whether or not it will continue next year.
 
In answering that question, a useful sense check is to analyse whether new builds have kept pace with or maybe even outpaced population increases. In most cases the figures are relatively well aligned. 
 
Over the last six years, the increase in the number of properties in Napier and Hastings has matched the increase in population -  so overall growth seems relatively justified; however with the projected population increase now slowing,  the build rate should also start to slow, or a risk of oversupply applies. 
 
The same applies in Horowhenua/Kapiti and Nelson, but not so much in Tasman, where the number of properties have increased 9% compared to a population lift of just 6%. This could reflect an increase in holiday homes and/or the amount of people accepting the commute into Nelson for work, so I’m not suggesting panic stations for the Tasman region just yet!
 
It’s not exactly advanced economics to point out that you need a local economy to support growth in population and property values - otherwise, once the money and jobs dry up people might have to leave to find income, thus causing a property oversupply.  If you’re investing in such regions, make sure your research focus extends beyond property to wider demographics and local industries too. 
 
So… if you’re heading off on a summer holiday, you’ve now officially got some fodder when the conversation undoubtedly turns to buying that beachside property or moving to the regions for a vastly improved lifestyle. Enjoy your break and do keep an eye out on Facebook and Twitter where we’ll keep sharing insights. 
 
- Nick Goodall, Head of Research - CoreLogic NZ
 
 

 

Tags: Property, CoreLogic, Auckland, Wellington, Housing, Real Estate, Property Market, Buying


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