THE NEW NORMAL

Auckland stands still while the regions continue to grow, but the figures all point to a coming slowdown in New Zealand’s smaller urban centres.

In Australia, the question is, how far will prices drop? In Auckland, there is no such drama, at least not in the figures. Fevered speculation around the performance of New Zealand’s biggest real estate market has led to predictions of a collapse in market activity, but what the latest data from OneRoof and Valocity shows is that Auckland’s property market has plateaued. The median value of all properties in the region currently sits at $898,000, down 0.1 percent on the quarter but up 0.2 percent on January 2018 (and again, down 0.2 percent on January 2017).

The reality is that Auckland’s market is soft and will continue to be, but an undersupply of residential housing and strong migration numbers will ensure the city doesn’t follow Sydney and Melbourne off the precipice.

For the rest of New Zealand, it is evident that affordability is driving much of the big leaps in value, but equally, there are signs that hesitancy is starting to creep into those markets, with value movement in the last quarter incremental at best in many of the smaller urban centres (only Wellington and Dunedin registered quarterly growth of more than 2.5 percent).

As of January 2019, the national median value stood at $598,000, up 5.7 percent on the year before but up only 1.4 percent on the previous three months.

The top five performing regions in terms of annual value growth were: Rangitikei, up 26.3 percent to $235,000; Opotiki, up 23.6 percent to $330,000; Whanganui, up 22.8 percent to $264,000; Tararua, up 22.2 percent to $215,000; and Gisborne, up 21.5 percent to $322,000.

What is obvious from these figures is that these regions are all coming off a very low value base and are finally catching up with more developed property markets, as first-home buyers priced out of larger urban centres and investors looking for better returns on their money turn their sights on smaller localities.

Nationally, sales volumes throughout 2018 were well down on those for 2016/17, and although there has been evidence of a small resurgence for some parts of the country, volumes at the start of

2019 are still

5.5 percent lower than at the start of last year.

A common way to gauge who is active in the market is to look at the breakdown of new mortgage registrations. Those numbers reinforce the picture of a market that’s uncertain about the future.

First home buyers accounted for 28.4 percent of all new mortgage registrations in January (up 4.4 percent on the month before) but investor activity was down 4.8 percent, with investors (those who own three or more properties) accounting for 16.6 percent of new mortgages. Those who own two properties represented 11.6 percent of new registrations, down 2.3 percent on the month before.

The pull back from investors is benefiting first home buyers, who are stepping into the void. Interestingly, investor activity increased in the regions that enjoyed the biggest leap in median values, accounting for more than a third of new mortgage registrations.

Residential building consents have remained relatively stable through the last three months. Consent volumes have generally trended upwards over the last two years and are now at the highest levels in the past 10 years. However, these numbers are still below consent volumes experienced during previous building booms.

In Auckland, noticeable lifts in values can be seen in more affordable fringe suburbs, such as Wellsford (up 6 percent on last year), and areas where large residential projects are under way, such as Paerata (up 83 percent in the last quarter) and Glenbrook (up 17.1 percent on last year). Suburbs with higher-value lifestyle or coastal holdings, such as Omaha and Red Beach, are also enjoying positive movements, as are several inner-city suburbs whose value is tied to the schooling options they offer, such as Epsom and Ellerslie.

Residential dwellings have experienced the greatest change over the course of year, with median prices down 7 percent. Apartments have remained relatively stable, however, with median prices flat at 1 percent.

Overall sales volumes are

down 40 percent on the same period last year - a clear sign that the hesitation that was evident at the end of last year has taken hold. Investors (those who own three or more properties) continue to shy from the market, with their share of new mortgage registrations down 2.6 percent to 14.9 percent of new mortgage registrations. First-home buyers’ share of new mortgage registrations has increased to 27 percent, but this larger number is more likely the result of other market participants withdrawing and Auckland salaries managing – just about – to stretch to new home purchases.

Consistent with the rest of New Zealand’s main centres, the number of refinancers in Auckland continues to increase, up 3.6 percent to 34.1 percent of new mortgage registrations, which indicates a further solidification of the “wait and see” sentiment in the market.

The reality is that Auckland’s market is soft and will continue to be, but an undersupply of residential housing and strong migration numbers will ensure the city doesn’t follow Sydney and Melbourne off the precipice.