City’s hous­ing mar­ket not what it ap­pears

Fig­ures can be de­ceiv­ing in Christchurch’s unique eco­nomic en­vi­ron­ment, writes Steven Per­dia.

The Press - - Business - ❚ Steven Per­dia is the gen­eral man­ager of strat­egy and plan­ning at ChristchurchNZ.

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.

House price growth in Can­ter­bury has his­tor­i­cally tracked just below the na­tional av­er­age. But for the past three years that has changed.

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