NZ property value gains slow in January, growth anticipated in 2018

Friday 9th February 2018

New Zealand property values rose at a slower annual pace in January but are expected to pick up in the coming months, says state-owned valuer Quotable Value.

Property values rose 6.4 percent on the QV house price index from January 2017 and slowing from a pace of 6.6 percent in December. Values gained 3.8 percent in the three months ended Jan. 31 to a nationwide average value of $671,531, QV said in a statement.

New Zealand's housing market has been slowing down over the past year as Reserve Bank restrictions on more highly-leveraged mortgage lending and tighter credit criteria being demanded by banks made it more difficult for borrowers, despite low interest rates making it easier to service much larger debts. RIsks posed to the broader financial system remain elevated, although lenders and rating agencies are less concerned, and the latest Barfoot & Thompson showed inventories building in the country's biggest city.

While sales volumes have dropped back, prices have remained high. Auckland values rose 0.7 percent in the year to January and 1.6 percent over the past three months, the highest rate of growth since November 2016, QV said. The average house value in the region is now $1.05 million, nearly twice the 2007 peak, and in the city it's $1.2 million, more than double the previous high.

"Market activity across the nation appears to be picking up now that people have returned to work from the holiday season," QV general manager David Nagel said. "The easing of the LVR restrictions for both investors and home buyers this month, along with continued strong net migration, low interest rates, and a shortage of housing supply means it’s likely we can expect moderate value growth to continue during February and March which are annually the busiest months in the housing market."

Wellington, where rents have skyrocketed due to inadequate supply, reported a 9 percent annual gain and 4 percent quarterly increase in the region, and 8.9 percent annual gains and 3.5 percent quarterly gains in the city. The average regional value of $634,811 is 39 percent higher than the 2007 peak, while in the city it is $764,560.

"A lack of housing supply, coupled with a recent increase in population, continues to put upwards pressure on values," said QV Wellington senior consultant David Cornford. "From an investment point of view, yields have started to creep up. This is a result of both higher rents and investors demanding higher returns now that value growth has slowed. I’d anticipate moderate value growth throughout 2018. The government is likely to further grow its workforce over the coming months, which should further increase demand and prices."

Cornford said the Healthy Homes Bill, pushed by the government in an attempt to improve living conditions for renters, would likely raise rents because many central suburbs such as Aro Valley, Kelburn and Mt Victoria are full of older villas which may cost a lot to bring up to the bill's standards.

"The surge in rents we have seen over the last three months is likely to motivate renters to enter the housing market and I’m expecting to see a strong presence again from first home buyers over 2018, particularly if LVR restrictions are eased further," he said.

House values in Christchurch fell 0.6 percent on an annual basis, but rose 0.8 percent in the quarter, to an average $494,459. QV Christchurch senior consultant Daryl Taggart said high supply and lack of demand has continued from last year in the market.

Hamilton and Tauranga, where prices have risen due to the 'halo effect' of investors going outside of Auckland, both showed increases in January. Hamilton values rose 0.3 percent in the quarter and 2.6 percent in the year, to an average price of $544,935, while Tauranga posted a 1.7 percent quarterly increase and a 3.9 percent annual rise to an average $698,875.

Dunedin's values rose 9.3 percent in the year and 2.6 percent in the quarter to an average value of $392,512. QV Dunedin property consultant Aidan Young said the first home buyer market had remained buoyant, due to a comparatively low entry-level price point, and market conditions were pushing rental prices up.

Hawkes Bay values kept rising, with Napier values up 15 percent annually and 3.5 percent in the quarter to an average $483,759, 42 percent above the previous peak in 2007. In Hastings, prices were up 16 percent annually and 3.9 percent in the quarter to an average $453,616, some 46 percent ahead of the 2007 peak.

Nelson property values rose 9.9 percent annually and 1.3 percent quarterly to an average of $558,587.

QV said there had been continued value growth across many smaller provincial centres in the North Island, with notable quarterly increases in Whanganui, South Waikato, Waitomo, Opotiki, Rangitikei and Carterton, and strong growth north of Auckland with Whangarei values up 10 percent and Kaipara rising 9.2 percent annually.

The South Island also saw notable value increases in regional centres such as Grey, Waitaki, Clutha and Southland. Queenstown Lakes saw values up 2.2 percent in the quarter and 8.1 percent annually to an average of $1.1 million.

(BusinessDesk)

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