Prop­erty mar­ket safe for now

The Press - - Property -

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.’’


New Zealand’s prop­erty mar­ket has had a soft land­ing.

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