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House price inflation stalls as lending restrictions bite: QV

Wednesday 5th April 2017

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New lending restrictions imposed late last year appear to be behind a slowdown in the pace of house price inflation in the first three months of this year, but the impact may not last.

The latest QV House Price Index from government-owned Quotable Value shows that while national property values increased on average by 12.9 percent over the year to March 31, the increase in the last three months was just 0.6 percent.

However, in the overheated Auckland housing market, QV warns the impact of tougher loan-to-valuation (LVR) restrictions may be temporary, even though Auckland house prices fell on average by 0.2 percent in the first three months of this year for a 12.3 percent annual increase.

“Values in parts of Auckland, Hamilton and Christchurch are still seeing a downward trend, but values are stabilising and continuing to rise in other parts of these main centres as well,” said QV’s national spokeswoman, Andrea Rush in a statement. “This means the downward trend and dampening in these markets seen since the latest round of LVR restriction may be shallower than anticipated.”

The LVR restrictions imposed from Oct. 1 target residential property investors, who are now required to have a deposit equal to 40 percent of any property they wish to buy before a bank is permitted to lend to them.

However, investor activity continues unabated, with QV noting that “sales to investors have hit a high of 44 percent and that the share of sales to cash buyers not affected by LVR restrictions has increased”, according to data compiled by rival real estate data firm CoreLogic.

“First home buyers have dropped to a record low of 19 percent of Auckland sales,” said Rush. While they faced less competition for entry level homes at present, “prices are still too high for most”.

“There are reports that some deals are falling over at the finance stage with some having trouble securing finance due to stricter criteria from banks.”

In less expensive areas previously dominated by investors, such as Manurewa, Papakura, Hillcrest, Sunnynook, Ranui and Glen Eden values had fallen in the last few months.

However, cashed up buyers at the top end of the market were still pushing values in upmarket suburbs such as Remuera and Mission Bay.

In central Auckland, prices rose 12.5 percent to an average $1.2 million, up 0.9 percent so far in 2017, to be 97.5 percent above the average price in 2007, when the market peaked ahead of the 2008 local recession and global financial turmoil.

On a national level, average house values are 52.4 percent above the 2007 peak, with an average nationwide house value of $631,432. Adjusted for inflation, the national average increase over the decade is 28.5 percent, with that growth heavily skewed to Auckland.

The country’s most affordable city – a combination of property values and income levels - remains Dunedin, QV found. Still, Dunedin house prices rose 15.4 percent on average in the year to March, to an average of $363,821.  There was strong interest in coastal property near Dunedin, which rose 9.5 percent in the first quarter of this year and 19.5 percent in the last 12 months.

Satellite cities around Auckland continued to show strong growth, with a notable 28.2 percent jump over the year to March in Rotorua house prices, to an average value of $391,910, the second highest increase of the 15 regions QV measures.

The strongest price growth for the year was in Queenstown Lakes District, where values rose 28.5 percent on average, to $1.0 million, the only part of the country outside Auckland where average house values are now in seven figures.

Hamilton house prices rose 15.7 percent over the year to average $532,888, while Tauranga property values were up 18.3 percent to average $676,381, “a much slower rate than prior to the LVR restrictions introduced last year” with much less interest from Auckland investors.

In Whangarei, prices rose 19.3 percent to an average value of $472,081.

In Wellington city, average house prices now top $700,000, having risen 21.2 percent in the year to March, although slowing in the first three months of this year to just 3.3 percent growth.

First home buyers were looking to Hutt City, Porirua and Wairarapa towns such as Featherston and Greytown for those priced out of the Wellington market.

Christchurch house prices were “rising again in all areas … apart from Banks Peninsula,” QV said, up just 2.4 percent on a year ago for an average value of $497,120.





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