Dunedin residential values continue to grow
Dunedin’s house market is the star performer in the latest CoreLogic QV House Price Index, with residential values growing 1.2 percent in August and 10.7 percent over the past year to $415,888. This is in contrast to the other main centres, although Wellington City values continue to show a strong rate of annual capital gains.
Dunedin values continue to grow off the back of low inventory levels, consistently high demand due to strong economic conditions, as well as relatively low housing prices which are attractive to a broad range of buyers.
Investors have reduced their activity over the past few years, but owner occupiers have picked up the slack. The release of MBIE’s Healthy Homes Standards discussion document this week will be of keen interest to investors in the south, as the quality of stock in the University town is well known as being of a lower standard.
Values in Auckland continue to track sideways as lending conditions remain tight, impacting buyer activity across New Zealand’s largest city where the average value hovers along at $1.05 million.
Wellington City tracked slightly down (0.2 percent) over the last three months, but values remain 7.4 percent above the same time last year as a lack of listings ensures some price pressure has remained, even in the quieter winter months.
Across the regions, the housing market has shown a mixed performance, as the annual growth
rate held or increased across five of the twelve centres - an improvement on the two recorded last month.
Invercargill property values saw a significant increase of 2.1 percent in August, taking the annual rate to 13.3 percent - the strongest percentage change in over 10 years for the Deep South. Strong demand from owner occupiers has been a contributing factor to this growth. Given the strength of global agricultural commodity prices, the wider Southland region’s specialism in agriculture, and the associated manufacturing/processing activities, underpin local economic activity and employment. This in turn provides impetus for the housing market.
Queenstown’s quarterly drop of 1.0 percent is noticeable and sees the annual rate drop to 5.3 percent - the lowest rate since September 2014. This could be evidence of a reduction in both demand and expectation from foreign buyers who are typically active in this market and are under scrutiny in the form of the `Foreign Buyer Ban’ being proposed by the Government. Property investors remain a key area of interest as both local and central Government continue to announce changes for the industry. The latest sees potential changes to the Tenancy Act in order to improve renters’ rights.
The Reserve Bank held the OCR rate at 1.75 percent last month and intimated the low interest rate environment looks set to remain. This stability should give confidence for current and potential homeowners, with mortgage affordability unlikely to worsen.
Business confidence is another area of considerable interest. It seems widely accepted that while the measure shouldn’t be ignored, it’s not forever and always a reliable economic indicator. While we remain cautious of the surveys’ implications for future economic growth, it seems businesses are saying one thing but doing another. Job growth is still strong as is growth in online job ads.
Meanwhile KiwiBuild takes a high profile place in many people’s minds. Recently the first completed KiwiBuild houses were unveiled. This visible progress for the programme was off the back of further information regarding the Government’s plan to set up an authority enabling it to relieve Auckland Council of its planning and consent authority for major housing developments in the city.
There remains a long way to go to improve the supply side of the equation, particularly in Auckland. Positive steps are being made, however any impact from the improved housing supply will take a while to be felt and in the meantime the overhanging shortfall will guard against a significant drop in prices across the city.
In summing up, market activity remains subdued and our indicators suggest there could be a slight worsening in housing market conditions yet before things get better. It remains to be seen whether this may contribute to the Reserve Bank considering a further loosening of the LVR restrictions which have been in place since November 2013 in order to bolster demand.
With spring now upon us we’re also expecting a lift in listings, but unless there’s also a subsequent lift in demand this could simply prolong the slowdown due to buyer choice increasing and the power swinging more in their direction.
Nick Goodall is head of research at CoreLogic NZ.