Auckland property values continue to fall, but holding elsewhere

KoreaPost 0 1,125 2019.04.03 10:45

NZ Property values have grown by only 0.5% this calendar year, with the annual rate of growth slowing to 2.6% at the end of last month.

 

According to the CoreLogic QV April House Price Index results, Auckland values continue to fall, with the index dropping 0.4% in March. This takes the annual figure to -1.5%, which is the biggest annual fall since the Global Financial Crisis 10 years ago. 

 

For full context though it’s worth noting that aside from minor monthly fluctuation, values have effectively plateaued for two and a half years now and across the Super City the average price is still higher than in September 2016. 

 

This is when the property party in Auckland essentially stopped, with funding considerably tightened, both by way of higher loan-to-value ratio requirements and more stringent bank expense testing.

 

Head of Research, Nick Goodall says that “Low affordability in conjunction with responsible lending standards and high levels of listings meaning plenty of choice for buyers remain an ongoing drag on Auckland’s property values. 

 

We had already seen a significant drop in sales volumes (14% drop compared to the previous summer) alongside an extension in the median number of days to sell a property (58 in February according to REINZ), so with values also declining it appears some vendors have been adjusting their expectations when it comes to achieving a successful sale.”

 

“Growth across the rest of NZ’s main centres has also shown some moderation, with the exception of Tauranga where values were up by 1.1% according to the monthly index at the end of March.”

Similarly, nearby Rotorua bucked the trend of general moderation in growth among the other main urban areas with annual growth surging to 12.6% from 9.4% at the end of February.

 

The most interesting development in relation to the property market over the last month was the Reserve Bank’s change of stance on the potential future of the Official Cash Rate (OCR).

 

The introduction of the sentence ‘the more likely direction of our next OCR move is down’ as part of their release last month came as a surprise to many commentators and is good news for current and future mortgage holders.

 

The OCR is only one factor influencing mortgage interest rates, and it’s unlikely they will fall any further off the back of any OCR drop - due to other bank funding costs, but it does push out the horizon for a potential increase. 

 

This provides more certainty for those owners currently paying a mortgage, likely at very low interest rates.

 

And it may also guard the Bank against the probably of rates rising if and when they increase the capital requirements of the retail banks.

 

Auckland property values continue to fall, but holding elsewhere. Eyes remain firmly on the Government and RBNZ.

 

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adc17502b56c4fa2a49525f52133aeae_1554241 

QV House Price Index, March 2019 Results Released: Tuesday 2 April 2019 | www.corelogic.co.nz

 

The detailed House Price Index results reveal where the weakness in Auckland is most keenly felt, with the more expensive Coastal North Shore (average value 1.36m) seeing a 4.1% drop over the last year. Meanwhile for the Onewa area within North Shore (average value $963k) values decreased by only 0.8%.

 

There’s a similar split in the old Auckland City area, with the more expensive eastern area, (including Remuera and Epsom), with an average of $1.54m, decreasing by 1.6% annually compared to a 0.4% drop in the ‘cheaper’ southern area (including Mount Roskill and Onehunga) with an average value of $1.09m. 

 

In the east of Manukau (average value $1.14m) the trend continues as values here are down 2.0% in the last 12 months compared to a minor drop of 0.3% in the North West (average value $777k).

 

The Hibiscus Coast, with an average value of $928k, is the only part of Auckland to see growth over the past 12 months(0.9%).

 

Elsewhere, the inconsistent growth in both Hamilton and Tauranga has continued, with Tauranga experiencing a stronger March but longer term more constrained growth. A modest rate of 3.7% annual growth epitomises the last 18months when the annual growth rate has bounced around between 1% and 5%. In Hamilton the annual rate picked up in September 2018, has moved between 4% and 6% since, and ended March 2019 at 4.5%.

 

In Dunedin, the annual growth rate of 13.3% remains the highest among the main centres, however the rate of growth did slow from 14.3% the previous month.

 

Property values in the wider Wellington region have recently seen greater growth than the other main centres in the North Island and that held true according to March’s index, with the annual rate shifting sideways to 8.4%. Within the region the more affordable Upper Hutt City (average value $$542k) has

seen the greatest growth over the past 12 months, at 12.3%.

 

Further north in Whanganui, property value growth appears to have run out of steam with values in the first three months of 2019 dropping by 2.0%. This has eaten into the significant growth experienced throughout much of 2018, however the annual growth rate remains relatively high, at 11.8% to the

end of March 2019.

 

In summarising the current market and outlook, Goodall said:

“Not much changed from the prior month in terms of property value change, however the wider property market environment holds its intrigue. The proposed ring-fencing rules relating to loss making residential investment properties are still working their way through parliament, but if enacted

will apply for the current income year (1 April 2019- 31 March2020) so assuming they pass into law they will need to be understood by investors now (although they won’t file their tax position until next year).

 

Later this month we’ll hear the Government’s official response on the Tax Working Group’s Report, with plenty of interest in their proposals for a more comprehensive capital gains tax for residential property.

 

Within the next month we’ll also get our first real insight into the impact of the foreign buyer ban from late last year as Stats NZ release their ‘Property Transfer Statistics’ by NZ tax residency for the first quarter of 2019. We’re expecting to see confirmation of the ban’s effectiveness, which the recent

reduction in sales volumes had already hinted at - particularly in Central Auckland and Queenstown.

 

And of course - we’ll then look towards the Reserve Bank’s next OCR decision on May 8. Their foreshadowing of a cut at some stage has many economists predicting one as early as the May date and possibly even another before the year is out.

 

All of this illustrates where our focus remains - on the Government and Reserve Bank as opposed to the usual macro-economic factors(mostly benign) and even international pressures (due to our relative insulation at this stage). In the end, the outlook remains one of a gradual easing in property values for the rest of the year”.

 

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adc17502b56c4fa2a49525f52133aeae_1554241
 

Source: corelogic.co.nz

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