Property market safe for now
Warnings of New Zealand’s property market becoming a bubble destined to pop look to have been proved unfounded – for now, anyway.
Two years ago, New Zealanders were being warned to brace for a sharp downturn in prices, which commentators said had become unsustainably stretched in relation to incomes.
Now, the latest QV House Price Index indicates that the market is righting itself by going nowhere for the time being. In theory, that should fix affordability concerns as incomes rise.
Nationwide, property values lifted 1.3 per cent over the three months to November. They were up 3.5 per cent over the year.
However there was no real change to property values in Christchurch and this is mostly true of the wider district too, with both Selwyn and Waimakariri continuing to experience only very minor annual growth of
1.3 per cent and 1.6 per cent respectively.
But in Auckland growth was positive – barely – for the first time in spring, with values rising
0.1 per cent. Manukau values dropped by 0.9 per cent over the three months. Across the city, the average value was $1.05 million for the November quarter.
CoreLogic head of research Nick Goodall said the city was continuing a long-term trend of having had no effective growth in two years.
Similar effects are being seen in other larger centres. Hamilton saw dips in value in November.
Within Wellington, growth slowed in November, however quarterly growth remained at 4 per cent for the region. Its average price is now $685,387.
Dunedin remains the standout of the main centres, with annual value growth extending to 11.7 per cent at the end of November.
There were still modest price gains in Tauranga, with quarterly growth at 1.2 per cent, to $713,859.
Goodall said tighter lending criteria had been a defining feature of the market in 2018, as banks took a more stringent approach to checking whether buyers could afford a loan.
That had reduced the number of buyers who qualified, he said.
‘‘This has led to somewhat of a mortgage rate war.
‘‘Banks are jostling to secure market share from each other.’’
From January, the Reserve Bank will allow banks to lend a little more of their new lending to borrowers with low deposits.
But Goodall said he did not expect to see a rush of buyers as a result.
He said the pressure would still be on them to prove they could afford to pay the loan back.
Provincial New Zealand’s property market is still performing better than the bigger centres.
Whanganui had the largest value change over the last year at
18.1 per cent growth. Value growth in Invercargill has started to slow, although it was still at 12.2 per cent.
The rate of value change in Whanga¯ rei picked up again, to
6 per cent in the quarter. Investors were a big influence there, making up more than 41 per cent of the market.
‘‘There’s still potential for those areas to see a little bit more growth, given some of the lending lifting up. But it certainly won’t last forever.
‘‘Places like Napier that saw greater growth at the start of this year have started to come back. I’d expect that to happen in most other areas,’’ Goodall said.
He added that reports of the foreign buyer ban impacting values in Queenstown Lakes District via reduced asking prices could also be showing through in the house price index – the annual rate of growth slowed from 8 per cent to 6.2 per cent in November, but it is early days.
Queenstown had 1.1 per cent growth in the quarter, to $1.2m.
Goodall said it was hard to see a scenario where the market would experience a sharp reduction in prices.
‘‘Perhaps if there was some international shock or something that would impact our economy significantly. We do still have high debt-to-income ratios – if there was something that affected our labour market and people were out of jobs that might put pressure on those owner-occupiers.
‘‘Certainly, with investments, those that are highly leveraged and incurring increasing costs because of legislation coming about, there’s still the possibility that certain types of buyers could see trouble in the future.
‘‘I think it’s more unforeseen things likely to impact it rather than the standard market forces that we track.’’