City’s housing market not what it appears
Figures can be deceiving in Christchurch’s unique economic environment, writes Steven Perdia.
OPINION: House prices in Christchurch are not growing at the same rate as those in other New Zealand urban centres.
On the face of it, flat house price growth compared with the national average would suggest the market is oversupplied.
However, the way we analyse Christchurch’s economy has changed following the earthquakes; traditional economic indicators for the city can’t be interpreted correctly in isolation.
For example, low GDP growth in the city doesn’t mean we are in recession, negative employment growth doesn’t mean our economy is shrinking, and low guest nights doesn’t mean visitors aren’t staying here.
In other centres these statements would hold true, but not in Christchurch.
A broader view is also needed when looking at data for Christchurch’s residential housing market.
As well as looking at median house prices, we need to look at the time it takes for homes to sell and residential building consents being processed for the city.
In recent months, all three indicators appear to be telling a different story and must be looked at together to understand the true state of the city’s housing market.
Christchurch and Canterbury have historically tracked just below the New Zealand average for house price growth.
However, for the past three years that has changed. The rest of New Zealand has enjoyed average annual growth of 7.3 per cent in median sale price, while Christchurch and Canterbury have remained flat. This is a long time to have an oversupply without the market adjusting.
With an oversupply of houses, we would expect it to take much longer to sell a house. But that doesn’t appear to be happening.
In normal conditions, you might expect a house to be on the market for between 28 and 42 days.
And yet figures show that the time to sell in Canterbury currently sits at 33 days and was about 30 days three years ago.
There is also an interesting correlation between the national average of time to sell and Canterbury’s figure; they are almost the same.
Looked at on their own, it would suggest the market health (demand and supply) in Canterbury and Christchurch for residential property has been the same as the rest of New Zealand for the past three years. It has not.
Adding to the picture, residential building consents have been easing since the peak of consenting in late 2014. This was expected as more homes were rebuilt after the earthquakes.
Yet, in the last six months consents seem to be poised for rebound at about 220 per month. This could be the new normal for monthly residential consents for new builds.
We have some data saying there is an oversupply of houses in the city, while other data indicates the market is healthy.
This really shows the importance of looking at the big picture, especially in Christchurch where the economic landscape has changed.
To understand this more the ChristchurchNZ economics team is going to do some further analysis, but in the meantime it’s worth giving this more thought.
Migration numbers are still high, building consents are poised for rebound, time to sell is similar to the rest of New Zealand – so why aren’t we seeing growth in house prices? Is it an oversupply of rentals? Is it perception of the market? It’s something worth considering.