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NZ house price slowdown may be short-lived in face of supply squeeze, migration: QV

Friday 1st September 2017

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Annual growth in New Zealand property values growth dropped below 5 percent for the first time in five years, as inflated Auckland house prices continued to moderate after several years of rapid gains.

The QV house price index rose 4.8 percent in the year to August, the slowest annual rate since August 2012 and down from an annual increase of 6.4 percent in July, state-owned valuer Quotable Value said. Values increased 1.2 percent to a national average $641,648 in the three months ended Aug. 31, more than double the previous market peak in late 2007.

The slowdown was once again led by the Auckland property market, where values rose 2.8 percent in the year, the smallest annual increase since October 2011. The average house in the region is now valued at $1.04 million, up 91 percent on 2007's peak or 59 percent on an inflation-adjusted basis.

New Zealand's house price growth has calmed since banks introduced tighter lending conditions and started indicating interest rates would start rising, while the Reserve Bank's curbs on riskier mortgage loans have excluded many first-home buyers who struggle to cobble together a sufficient deposit on increasingly expensive houses.

"A lack of listings over winter, LVR restrictions and stricter lending criteria by retails banks have led to a 30 percent drop in market activity and sales volumes compared to the same time last year," QV national spokeswoman Andrea Rush said in a statement. "General elections also traditionally compound any annual winter slow-down in the housing market due to uncertainty caused by potential policy changes so it’s likely this is also a factor in the subdued sales activity."

Rush said in Auckland new subdivisions that were previously popular with property speculators, are now being discounted as demand wanes.

"It’s possible the crack-down by the Chinese government on the amount of capital allowed to leave the country may be a factor as it’s now much harder for new migrants or foreign buyers from China to get their cash out to purchase property," Rush said. "It’s likely the annual spring upturn in the market may be slower to arrive given the pending election but with the underlying drivers of a lack of supply and high net migration particularly in Auckland still remaining, it’s possible that values may begin to rise again more steadily in the new year."

In Hamilton, house values rose 1.4 percent in the three months to Aug. 31 and were 5 percent higher than a year earlier. The city was an early beneficiary of the slowdown in Auckland as investors shifted their focus further afield, but the market is now void of investment buyers, QV Hamilton valuer Stephen Hare said.

Tauranga, another centre which saw house prices rise due to investor interest, saw values up 1.7 percent in the quarter and 9.6 percent annually, pushing the average value to $694,361. Valuer David Hume said the market had stabilised from the panic buying in 2015 and 2016, with investors "definitely much less active in the market".

In Hawkes Bay, values continued to gain strongly, with Napier up 18.8 percent annually and 5.3 percent in the quarter to an average $459,393 while Hastings has seen 18.4 percent annual gains and 2.9 percent quarterly rises to $425,780.

"Central Hawkes Bay remains a popular and affordable option for those that have missed out on property in the main centres as it’s within commuting distance and this makes it a viable option," valuer Michelle Drinkrow said. "First home buyers and investors remain active in the residential market."

Wellington region property values dipped 0.4 percent to $605,435 in the three months ended July 31 for a 12.9 percent annual gain, while Wellington city values were down 0.3 percent in the quarter and up 12.6 percent in the year to an average 724,965. Valuer David Cornford said the market is stable and "very under supplied", with spring likely to bring back activity to the market.

Christchurch city values softened by 0.4 percent to $493,069 in the rolling three-month period for an annual gain of 0.1 percent, while Dunedin property values rose 0.5 percent to $375,814 on a three-monthly basis for an annual increase of 12.6 percent. 



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