A GAME OF CATCH-UP
Values in most of the major metros have stabilised, but growth is still strong in smaller regional markets. The question is: how long will that growth last?
The national median value remained stable throughout 2018 - it now sits at $444,500 - but sales volumes decreased significantly, down nearly 15 percent on November 2017.
This data, together with anecdotal evidence, suggest many Kiwis who would otherwise be active in the market, are waiting on the sidelines for signs that they should go ahead and buy or sell.
New mortgage registrations are a good indication of who is actually active in the property market. This year, the biggest growth was in the refinancing of existing loans, while the biggest drop was in the number of mortgages for those moving from one property to another. This shows that Kiwis are choosing to stay in their current home and are making the most of the low mortgage rate environment rather than selling and moving on.
However, New Zealand isn’t simply one big uniform property market. There are significant differences between each of the regions and cities.
Wellington
Compared to other major urban centres, Wellington had a strong 2018, with property values surging 7.4 percent to $740,000 in the 12 months to November 1.
Much of the lift can be attributed to houses in the capital coming off a low value base and a tightening of listings, with sales volumes dropping 10 percent on the same period last year.
More than a third of all housing stock in the Greater Wellington region is valued at under $600,000 – making it an attractive option for those trying to enter the market.
First home-buyers represented 31.7 percent of all new mortgage registrations in the region, while the share of new mortgage registrations to investors (those with three or more properties) continues to decline, now representing only 15.3 percent.
Christchurch
Christchurch’s housing market in 2018 was the same as Christchurch’s housing market in 2017, and in 2016 and 2015. The city’s median value rose just 0.5 percent to $445,000 in the last 12 months (it was up zero percent on 2016 and 1.1 percent on 2015)
Stability in a region that is overshadowed by the threat of instability is no bad thing, and Christchurch’s performance gives a hint of what the rest of New Zealand can expect during a plateauing market.
Sales volumes do reflect softer market conditions in the city – they are down 12 percent compared to the same period last year – and construction activity has slowed down since the rebuild reached its peak in
2016, with new building consents down more than 18 percent year-on-year.
However, much of Christchurch is within reach of first home-buyers: nearly three quarters of its housing stock carries a value of $600,000 or less, and first home-buyers represented almost a third of new mortgage registrations in the city in 2018.
Hamilton
After a period of strong house price growth, the Hamilton property market has started to plateau.
The median value of the city’s housing stock currently sits at $551,000, up just 1.5 percent in the last quarter and 6 percent on November 2017.
Despite the significant growth in values experienced during 2015-2016, more than half of the city’s homes are valued below $600,000, which makes it an attractive place for Aucklanders looking for more affordable housing options.
First home-buyers represented a healthy 30.1 percent of new mortgage registrations in 2018, while investor activity remained stable, up from 20.7 percent this time last year to 21 percent now, which indicates the city is still seen as a good place in which to invest.
Tauranga
Tauranga’s growth years, when values rose 33 percent, are behind it. The city’s median value barely moved in the last quarter - up 1.4 percent to $650,000 in the three months to November 1, 2018.
Sales volumes continue to slide – down 12 percent on the same period last year – a reflection of tighter market conditions. Buyers and sellers appear to be in a holding pattern, but as with Auckland, the city’s population is booming and there is a demand for quality, affordable housing.
First home-buyers continue to represent the largest share of new mortgage registrations (27 percent), but the slide in investor activity (down to 15.4 percent) suggests that group of buyers is looking further afield. Nearly 65.7 percent of Tauranga’s housing stock is valued above $600,000, with the majority of homes transacting for $600,000$750,000.
Queenstown
Still the South island’s star performer, Queenstown saw its median value grow 10.7 percent to $1,006,000 in the 12 months to November 1, 2018.
Driving this growth is the high proportion of high-value properties in the region and the limited supply of properties in lower price brackets. A shortage of rental properties, needed to serve locals and seasonal
workers, has also added to pentup demand in the market.
However, it should be noted that growth appears to have stalled somewhat in the last quarter and that sales volumes in the six months to October
1 are well down on the same period last year. Building consent numbers, however, have stabilised after stalling during 2017.
Overall the Queenstown property market is still characterised by a significant supply-demand imbalance, a trend which is expected to continue in 2019.
Dunedin
Dunedin’s housing market is still very much up in catch-up mode. The median value sits at $389,000, up 9.3 percent in the 12 months to November 1, 2018 and 23.4 percent in the last 24 months.
However, it is important to note that Dunedin’s house values are quite low compared to the rest of New Zealand’s major cities - 81.1 percent of housing stock there is valued at $600,000 or less.
This explains why Dunedin remains popular among first home-buyers, who represented 31.1 percent of new mortgage registrations in 2018.
The picture that emerges from the figures from the last quarter is also similar to that seen at a national level. The growth spurt in property values in the city has slowed - up just 1.6 percent - and sales volumes are down 6.5 percent on the same period last year.
Whangarei / Northland
The housing market in Whangarei is performing strongly, with the median value rising 8.2 percent to $514,000 in the year to November 1.
Although the surge in Whangarei’s property market is from a low base, it is still considerable. The median value has risen $165,000 in the last three years, not an inconsiderable amount.
Whangarei and the rest of Northland still remain relatively affordable, with 59 percent of residential stock coming in at $600,000 or less. Unsurprisingly, first home-buyers made up the bulk of new mortgage registrations in 2018 – at 28.7 percent.
Overall, the region remains popular with those seeking to relocate from larger urban centres for more affordable housing options and superior lifestyle properties.
Bay of Plenty / Gisborne
Affordability and close proximity to Tauranga have been the key drivers of growth in Rotorua, with the city’s median value rising 16.8 percent annually to $433,000. Growth slowed in the last quarter to 5.9 percent – a figure owners in most Auckland suburbs would overjoyed with – but the figures suggest the market still has plenty of energy, although the drop in sales volumes indicate that growth Rotorua will eventually flatten.
Taupo and Gisborne have also seen 10 percent-plus increases in median values, but as with many of the other high-growth regions in New Zealand, both are coming off low median bases.
The majority of housing stock in both Gisborne and the Bay of Plenty (excluding Tauranga) is valued at $600,000 or less, making both regions favourites among first home-buyers who have been priced out of more expensive markets.
Palmerston North/ Whanganui
Palmerston North and Whanganui have benefited strongly from their reputations as having a large amount of affordable housing. The median value of all residential properties in Whanganui rose 15.5 percent to $246,000 in the 12 months to November 1, 2018; while Palmerston North saw an annual increase of 11.6 percent to $365,000.
Sales volumes remain significantly down compared to the same period last year, although anecdotal evidence suggests that these numbers have begun to strengthen in the lead up to summer.
Building consent numbers remain below their peak of 2017 but have trended upwards since Feb/March of this year.
Napier / Hawke’s Bay
Napier’s housing market is in full catch-up mode – the median value of all properties in the city rose 13.6 percent to $483,000 in the 12 months to November 1, 2018.
The wider region continues to remain relatively affordable compared to the rest of New Zealand, with 74.5 percent of housing stock valued at $600,000 or lower. This has made the region a magnet for first home-buyers, who represented 27.5 percent of new mortgage registrations in 2018.
Building consent numbers are below their peak in August / September 2017, numbers over the last three months appear to have stabilised.
Overall, the region is still benefiting from increased demand for residential housing, which appears to be fuelled primarily by market participants seeking more affordable housing stock in a location which also offers strong lifestyle and employment opportunities.
Nelson / Marlborough
Nelson and Marlborough enjoyed stable value growth over the last 12 months, with Nelson’s median value topping $500,000 for the first time, and Marlborough’s sitting at $493,000.
However, growth has stalled in the last quarter, and sales volumes remain down compared to the same period last year. This has been more noticeable in Marlborough, which is down 7 percent.
Both areas are relatively affordable when compared to other main centres - and their appeal to first home-buyers is increasing. First home-buyers represented more than 20 percent of new mortgage registrations in Nelson in 2018 and more than 30 percent in Marlborough.
Invercargill
The “catch-up” effect can be seen most clearly in Invercargill, which saw some of biggest growth spurts in 2018. The median value of all residential properties in the city rose 6.5 percent in the last three months and 15.9 percent in the last 12. It is important to note, though, that this growth is coming off a low base, with the median currently sitting at $259,000.
The city is proving increasingly popular with first home-buyers, who represent 31 percent of new mortgage registrations. Investors are also active, with anecdotal evidence suggesting the high prices and low returns in Queenstown have forced them to look further south.