Will Canterbury house prices rise or fall this year?
risks, such as debt, as happened with the global financial crisis, which affected the world’s property markets in 2007-08.
‘‘There could be global surprises. We have a good economy, but we are susceptible to shocks. It doesn’t take too much to reach a tipping point.’’
A combination of low employment growth, high debt and rising interest rates ‘‘adds up to the possibility that house prices that are not doing much now could fall. Not by double figures, that just doesn’t happen here, but we could be talking from zero to 5 per cent. Not like in the US where people walk away from their homes. ‘‘Here, we just ride it out.’’ Valuer Natalie Edwards, of Urban Edge Valuations, expects little drama ahead, despite political talk.
‘‘I can’t see anything on the horizons that is strongly going to affect the market,’’ she says.
‘‘I don’t think the Labour Government could do anything that drastic. They are pretty pragmatic as far as property is concerned.’’
Edwards does not expect ‘‘a significant impact’’ from the Reserve Bank’s loosening of lending limits.
In the greater Christchurch area, median prices are now double what they were in 2004. Values in the city have risen about 30 per cent in the past decade and slightly more in the city’s commuter belt in the Selwyn and Waimakariri districts, which had a post-quake population boost. Average weekly rents have fallen since peaking at $433 in early 2015 during the residential rebuild. They are now about $365, according to government bond data.
This is already having a cooling effect on demand from investors, with lower returns and less tenant demand deterring them from buying. First-home sales have increased while prices have been flat and borrowing rates low.
Construction costs affect prices of existing homes. Christchurch is the dearest city in which to build a home, with a 140-square-metre three-bedroom house costing just under $280,000 to put up, excluding land and costs like fees and consents. This compares with $275,000 in Auckland, $261,000 in Wellington and $255,000 in Dunedin.
Will Blake, a valuer at Knight Frank, says that historically any downward changes in house values in Christchurch have been quite small and shortlived.
Without commuting times being a major issue in the city, the apartment market, which is more prone to price fluctuations, is small.
‘‘When you have had a dip, it’s usually fairly minor and fairly short lived,’’ Blake says. ‘‘There’s no indication of a downturn.
‘‘What has happened with the earthquakes is it did remove a lot of cheaper housing from the market, with the red-zoning, and they have been replaced with modern homes.
‘‘So the average house is of better quality, with a higher value, than pre-quake.’’
Blake says that while the earthquakes boosted the market, that would have happened anyway, just a little later.
‘‘We’ve followed these fiveyearly cycles where we have a very flat market, and then it picks up again. If we look at that longterm trend, it doesn’t really look like the earthquakes had any real impact. ‘‘If our market follows the historic trend, house prices can be expected to remain more or less static for another three years.’’