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Post-lockdown sugar rush running out of puff

05 Aug 2020

New Zealand’s housing market resurgence appears to be coming to an end with the latest QV House Price Index data showing quarterly value growth continues to slide. With the removal of the government wage subsidy and bank mortgage relief packages scheduled to end soon, the property market could still be in for some hard times. 

The average value nationally increased just 0.4% over the past three month period, down from 1.3% in June, with the average value now sitting at $739,151. This represents an increase of 7.5% year on year, almost unchanged from annual growth of 7.4% last month. The average value in the Auckland Region sits at $1,077,237, down 0.2% over the last quarter, with annual growth at 5.1%, down slightly from June’s year-on-year growth of 5.4%.

QV General Manager David Nagel said: “The QV House Price Data continues to reflect a gradual decline in quarterly growth in July, with the vast majority of the big towns we monitor showing a reduction in the rate of growth since June. But more importantly three of the locations have actually shown a decline in value levels since the end of April.”

Auckland, Queenstown and Dunedin all showed values had fallen back over the past three months with Queenstown Lakes hit by the biggest fall losing 4.2% over the past quarter. “Dunedin was probably the biggest surprise, recording a 0.3% decline over the past three months. However, it needs to be read in context given values have increased 20% over the past year,” says Mr Nagel.

“There’s been plenty of hype around demand and we’re still seeing well attended auctions and open homes, especially for the more affordable housing stock. This has resulted in strong transaction numbers in the past few weeks leaving limited stock. But there’s also a lot of properties that aren’t selling as buyers exercise both caution and patience as they search for a suitable property,” he says.

“Unfortunately first home buyers are competing head-on with the more buyer savvy investors and this has created a bottleneck of demand in the more affordable locations and property types,” says Mr Nagel. “However, this has provided a level of confidence for developers to continue to feed the supply pipeline with the creation of new developments,” he says.

“Cashed up investors will also be keeping a close eye on the Residential Tenancies Amendment Bill, with anecdotal evidence of some investors holding back from adding to their portfolios until greater certainty of the political landscape. This has helped first home buyers more than hold their own in gaining their share of the market, particular at the affordable end”, he says.

“We’re seeing some predictable value trends mixed with unusual data as the market tries to adjust to the uncertainty of the market, especially with an election looming. Reductions in value for tourist towns like Queenstown were forecast early, however the strength of towns like Rotorua were more surprising and likely a reflection of strong local tourism demand,” he says.  

“A lot of commentators are looking at the strong annual value growth which is tracking well at 7.5% however, what people need to be aware of is that most of that growth occurred in late 2019 and early 2020. The QV HPI quarterly data provides a better market barometer and the steady declines we’re seeing in value growth even before the economic stimulus initiatives come to an end, creates some concerns,” says Mr Nagel.

“With an ounce of luck, including keeping our borders secure, we may get away with just a 5% correction in property values by the end of 2020. That would be a great result given the exceptional value growth experienced throughout most of the country over the past two years. But there’s still a lot that can go wrong over the next few months and we’re not out of the woods yet,” he says. 


A full breakdown of the QV House Price Index figures for July 2020 is available by clicking here

The Auckland residential property market appears to be ticking along with limited listing numbers and low interest rates maintaining price levels from earlier in the year. The average house value has seen a slight drop of 0.2% to $1,077,237 but remains up 5.1% year-on-year.

The latest QV data does indicate a slight weakening this quarter in Auckland City, where the average price has dropped 1.5%. That has largely been driven by a 2.2% fall in central residential property prices, likely as a result of a slow-down in central city apartment and high-value property sales post-lockdown. 

The North Shore has also experienced a slight drop this quarter, falling 0.7% to a new average house value of $1,240,917. Waitakere (1.3%), Manukau (1.8%), and Franklin (1.5%) have bucked this quarterly trend and continue to perform well. 

When it comes to annual growth, Manukau continues to lead the pack at 6.4%, followed by the North Shore and Waitakere, which are both on 5.9% annual growth for the year to 31 July 2020. Despite a drop in value this quarter, Auckland City prices remain 4.2% higher than the same time last year.

QV Senior Consultant Rupert Yortt commented: “A common theme in the market is the lack of listings with buyers showing a business-as-usual approach to the market. The forecast of long-term, low-interest rates has put some confidence in the housing market and auction rooms are still yielding good results.”

“Valuers working on the North Shore are continuing to see prices hold up and there is demand for sections in new developments, which has previously been a slower performing sector of the market. In South Auckland, first home buyers and investors continue to be very active, while in West Auckland prices are steady.”

“The last five months of 2020 will be interesting to follow as economic pressures start to mount.”

Residential property prices remained fairly stable in Whangarei over the past three months with an average increase of 0.6% to $578,488. Annually, the city’s residential growth rate is 5.6%.

According to QV Property Consultant Jeff Robinson most of the activity is occuring at the lower end, with agents reporting strong interest typically leading to multi offers being received. “There’s plenty of competition between first home buyers and investors and this is maintaining steady demand at the entry level locations and property types. However, this demand tends to taper off as value levels increase.” 

The latest QV data for Tauranga shows an average increase in residential property prices of 2.5% over the past quarter and 7.5% annually, bringing the average house price up to $794,004.

The number of new building consents issued by the Tauranga City Council has rebounded to pre COVID-19 lockdown levels. Almost 60% of the building consent value was issued in the Papamoa and Mount Maunganui suburbs and just over 25% of consent value was issued in the Otumoetai and Bethlehem suburbs. 

QV Property Consultant Derek Turnwald commented: “Tauranga is one of the cities likely to appeal to the many New Zealanders returning from overseas. Employment prospects are strong and the city offers housing that is comparatively more affordable than Auckland. This is likely to ensure sales are strong particularly in the mid to high value range.”

However, he noted that Tauranga still had a lack of listings while property owners wait to see what the future will hold with the uncertainty around COVID-19.

Residential property sale prices have seen a moderate increase of 0.9% over the past three months to an average of $635,289, while annual growth is sitting at a much more robust 8.6%.

The south-east has performed particularly well, climbing 2.1% this quarter and 10.3% annually to $593,683. “This is underlined by continued infill development in the area, with older dwellings on large sections making way for multi-storey townhouses,” says QV Property Consultant Jarrod Hedley. “This has been fuelled by demand for student rental accommodation and also by first home buyers.”

He added: “Current sentiment is that while agents continue to experience a shortage of listings, the property market will be able to be maintained at its current level with a majority of the Waikato region experiencing little distraction post lockdown.”

Rotorua’s residential property prices have risen 6.7% over the last quarter and 13.9% annually, with the average house price now sitting at $537,212.

As with most regions this month, QV Property Consultant Derek Turnwald notes a lack of residential listings while property owners weigh up the ramifications of the current COVID-19 health crisis and what impact it will likely have on the housing market.

“There is still a cautious but optimistic approach being displayed by vendors and prospective purchasers,” he said. “Most vendors still have a preference for listing with ‘by negotiation’ or by auction, which could be an indication of that uncertainty in the market.”

“Some property owners are now returning to the burden of pre-COVID home loan repayments as short-term repayment holidays come to an end. This together with a high number of redundancies in Rotorua could see a spike in pressured sales.”

New Plymouth
New Plymouth residential property prices increased by 0.7% over the last quarter and 10.3% annually, with the average house price now rising to $513,802.

QV Property Consultant Danny Grace says the Taranaki market also continues to be very active in Stratford and South Taranaki with price rises of 6.1% and 1.5% respectively over the past quarter. 

“Initially after lockdown, agents reported vendors were somewhat tentative about listing property for sale in this uncertain time and were waiting to see what the ‘market does’ before committing. There is more confidence in the market than originally thought, however, and agents report vendors are now confident to list.”

“We are still seeing lower levels of stock on the market, which is a continuing trend for our region over the winter months,” he says. 

Hawke's Bay
Residential property prices have grown by double digits year-on-year in Napier (11.6%) and Hastings (13.4%) to an average of $618,867 and $593,471 respectively. However, quarterly growth remains relatively flat at just 1.5% and 0.9% respectively.

QV Property Consultant Nicola Waldon sees this as further evidence of a slow down in the region. “We aren’t seeing high sales volumes,” she said. “More a steady clearing of what is coming to the market selling quickly and appearing to follow pre-Covid-19 lockdown levels.”

“We are also hearing that the banks are tightening up on lending requirements, especially for first home buyers who are purchasing lower valued properties that may have deferred maintenance issues. Even though the LVR restrictions have been eased and the cost of borrowing is low at the moment with low interest rates, there is more scrutiny on serviceability.”

Although Nicola Waldon expected to see an increase in property listings in the spring, she noted that there was still an element of uncertainty about the market with regards to the imminent end to Covid-related mortgage holidays, as well as the election in September. 

“Now that the backlog has been cleared somewhat from lockdown and those people that needed to sell or buy have done so, those who would like to buy are adopting a wait and see approach.”

Palmerston North
Residential property prices remained relatively stable in Palmerston North over the past three months with an average increase of 1.7% to $515,832. Annually, the city’s residential growth rate is 14.8%.

According to QV Property Consultant Olivia Roberts the market has been strongest at the lower end, with agents reporting strong interest typically leading to multi offers being received. “There is still a large amount of uncertainty in the market as the full effects of COVID-19 lockdown are yet to be fully felt with the government's wage subsidy set to end in September 2020.”

The Wellington area saw residential property values remain all-but static over the last quarter, increasing by just 0.4% to an average price of $788,804. Annual values have increased by 10.7%.

Upper Hutt made a relatively big gain of 2.4% this quarter, while growth in Porirua and Hutt City was kept to 0.8% and 0.6% respectively. In Wellington City, there was no movement either up or down in the residential property market this quarter, but it remains up 8.2% annually.

QV Senior Consultant David Cornford says Wellington continues to be a competitive market overall due to a lack of listings, low interest rates and strong buyer demand. “The market is active with quality properties continuing to sell relatively quickly and at strong sale prices.”

“People who have secure employment now have greater purchasing power due to lower interest rates and have shown that they are prepared to purchase, relatively undeterred by the uncertain economic conditions. 

“The central city suburbs are seeing a number of returning Kiwis enter the market, while the Hutt Valley and Porirua are seeing strong demand from first home buyers.”

The Nelson property market continues to hold its own with a slight increase of 0.5% over the past quarter and 6.4% annually. The average residential property value now sits at $662,839.

QV Senior Consultant Craig Russell says this growth appears to be underpinned by record low interest rates and strong national migration to the region. “Properties are currently selling readily with strong numbers being recorded at open homes, culminating in multiple offer situations for some properties. In addition to this we are seeing manageable lifestyle properties generating good interest.”

He says considerable land development around Richmond and Stoke should alleviate some of the supply pressure in the market upon completion.

Christchurch residential property values have increased an average of 4.3% year-on-year to July 2020, and just 0.5% over the past three months. The average value of a residential property in Christchurch is now $519,233

QV Senior Consultant Kris Rogers commented: “Demand for properties in the lower to mid-price bracket remains strong. This coupled with a shortage of listings at this time of year has placed upward pressure on values within this range. 

“Expats returning home and first home buyers are active in the market and any anticipated negative sentiment in the market has yet to transpire and impact value levels.”

The market conditions are following a similar trend in the Waimakariri and Selwyn districts, which have recorded an increase of 0.6% over the last three months. The average value of a residential property in the Selwyn district is $567,844; in the Waimakariri District it’s now $465,288.

Residential property values have remained relatively steady in Dunedin over the past three months at a slight loss of 0.3% but remain well up over the past 12 months at 20%. The average current value is now $550,820.

QV Property Consultant Tom Patterson commented: “Demand remains high for residential property in Dunedin City, underpinned by a shortage in housing stock and low interest rates keeping first home buyers and investors active.

“There has also been a reasonable level of activity in the upper price bracket which indicates confidence in the market.”

Queenstown Lakes
Despite a drop of 4.2% over the past three months to an average residential property value of $1,165,187, QV Property Consultant Greg Simpson notes that the average current value in the Queenstown Lakes region remains healthy within the previous 12-month range at a loss of just 0.9%. 

“At this stage, value levels of superior Queenstown properties appear to be holding and we are not recording any major reductions in sale prices as vendors hold out for what they believe their property is worth,” he says. “However, the more affordable properties below $1,000,000 have taken more of a hit which have previously been rented either long or short term. Listings are, however, up a little from the previous year but not dramatically.”

He says the next three to six months could be the most telling for the Queenstown Lakes area. “The Trans-Tasman bubble may be some way off as a result of the outbreaks in Victoria and New South Wales, and the end of the wage subsidy scheme is imminent, along with a review from banks of those on mortgage holidays, which means that September/October could be realisation time for some property owners.”

Residential property values in Invercargill have climbed 2% over the past three months to a new average value of $361,922. That number is 19.2% higher than the same time last year.

QV Property Consultant Andrew Ronald is seeing strong demand for properties within the $250,000 to $400,000 range. “Multiple offers remain common, often resulting in prices above the initial asking price,” he says. “There have also been a number of recent sales within the $600,000 to $1,000,000 range which shows confidence in the region, despite the recent announcement of the planned closure of the Tiwai Aluminium Smelter.”

Although the buyers have been predominantly locals and first home buyers, Ronald noted evidence of strengthening investor interest in the region, given low interest rates and favourable returns compared to other parts of the country.

Provincial centres, North Island
Ruapehu leads the North Island in quarterly growth at 12.4%, followed by Rangitikei and Tararua at 10.2% and 9% respectively. Wairoa had the biggest drop over the same period (-7.2%) but remains up 12.6% over the past 12 months. Annually, Rangitikei has seen the biggest gain at 31.4%, followed by South Waikato (25.2%) and Ruapehu (23.6%).

Provincial centres, South Island
In the South Island, Clutha has seen the most growth over the past three months at 11.8%, followed by Westland (6.9%) and Southland (6.3%). Annually, Clutha again leads the way with a 26.5% increase since the same time last year, followed by Gore (21.1%) and Dunedin Taieri (20.6%). 

Annual change in values
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