Quoteable Value (QV) has reported a lower average house sale price in May and expects prices to fall further in coming months as rising interest rates and a surplus of listings intensify the downward pressure.
QV said property values were up 5.6% in the three months to May from the same 3 months a year ago, but this annual increase was less than the 6.1% reported in the three months to April.
Nationally, values are now 4.1 percent below the market peak of late 2007, down from the 3.9 percent reported last month, QV said. Given CPI inflation of 5.5% since the last quarter of 2007, real price deflation of house prices is approaching 10% from the peak.
"In the early months of this year more properties came onto the market, but at the same time buyer confidence wavered as pre-budget announcements and talk of rising interest rates put uncertainty into the minds of both investors and home owners," aid Jonno Ingerson, Research Director for QV.co.nz.
"The resulting increase in properties for sale combined with less demand has subsequently begun to push prices down” Ingerson said.
“The low activity levels over the past few months were in part due to buyers waiting for the budget announcement. With the various tax changes still some time away, any effects are likely to take some time to flow into the market. There is little evidence so far of a change in buyer or seller sentiment with QV valuers across the country reporting no increase in the number of enquiries. As a result we expect that sales volumes will remain static over winter” said Ingerson.
“While the changes to tax treatment of investment property may have some downward impact on the lower value end of the market in some areas, it is unlikely that the changes will cause prices to drop across the board. Instead we expect the general lack of buyer confidence and low sales turnover to continue to put downward pressure on prices in the short term” he said.
Values in all the main centres have flattened or declined in recent months leading to a decrease in the annual change in values, QV said.
Values across the Auckland area are 8.8 percent above last year, back further from the 9.5 percent reported last month. Hamilton values have dropped to 1.7 percent above last year, Tauranga to 0.4 percent, and the Wellington area to 6.0 percent.
In Christchurch values dropped back slightly to be 6.2 percent above last year, and a further decline in Dunedin saw the annual change drop to 4.8 percent compared to last year. The provincial centres remain more variable both in terms of the change since last month and in comparison to the same time last year. Napier (6.5 percent above last year), New Plymouth (6.9), Palmerston North (6.7), Nelson (6.3) and Invercargill (5.4) remain significantly above last year. Gisborne (1.2), Wanganui (1.3) and Queenstown Lakes (0.8) are slightly above last year, whereas Whangarei (-0.7 percent) and Rotorua (-0.8) are now below the same time last year.
More details from QV on regional price trends are below:
Property values in the Auckland region increased by 8.8% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down from the 9.5% annual growth reported in April. The average sale price for the region increased from $532,538 to $534,639.
Glenda Whitehead of QV Valuations said; “QV’s numbers for the Auckland region predominantly show growth easing, and this represents the market movement over the year where growth has not been maintained. However, we need to keep this in context of current market direction. The Auckland Region’s residential market is essentially flat, and has been since the beginning of the year”.
“While it makes for relatively bland discussion in property circles, we get the feeling that some are comforted in knowing that the residential market is stable within the changing mix of other economic indicators. The Budget announcement has yet to have any noticeable impact, and may take months to show through. This may be appeasing the sentiment of some who were worried of the effects. We see no evidence that any major value adjustments will eventuate in the short term. We continue to note that there are pockets of the market which are stalling while others continue to perform well. No one size fits all in this market” Ms. Whitehead said.
“Within Auckland City, it appears to our valuers that the market is moving sideways, perhaps reflecting a lack of confidence in its short-term direction. QV valuers servicing Manukau City report continued activity in the low to medium price bracket suburbs at levels similar to recent months. A number of recent sales in the Papakura/Franklin area indicate a slight easing in values. This is perhaps caused by a lack of demand, or could be merely a seasonal variation. Pockets of these districts still have a number of mortgagee sales occurring, and enough volume of these sales in an area can depress values overall” Ms. Whitehead said.
“The North Shore market continues at a relatively steady pace, although some feedback received indicates that there is a little less buyer interest in properties at the upper end of the market” Ms. Whitehead said.
Property values in Hamilton increased by 1.7% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down on the 2.7% annual growth reported in April. The average sale price for the city decreased from $357,200 to $350,722.
Mr. Richard Allen of QV Valuations said; “This is the third consecutive month where QV’s year-on-year growth in Hamilton has declined, and it would not surprise if this downward trend continued through winter. This is due to a number of factors which include the confirmation of tax changes and the impact of those changes on investors, the likelihood that interest rates will increase in the near future, and the traditional winter malaise. We can expect demand to be dampened and growth in general to be stifled in Hamilton for the time being”.
“During May, the only area which was exempt from easing growth was Hamilton South West, where year-on-year values actually increased from 0.7% to 0.9%. The largest decrease was South East Hamilton which decreased from 2.5 % to 0.4%, followed closely by the Central City/North West area. It appears there are some subtle differences in value trends between suburbs” Mr. Allen said.
Property values in Tauranga increased by 0.4% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down slightly on the 0.6% annual growth reported in April. The average sale price for the region decreased from $412,080 to $409,376.
Mr. Shayne Donovan-Grammer of QV Valuations said; “The Tauranga region, in my view, is in a brittle state. In the recent past prices have eased back steadily, with a clear oversupply of properties on the market. To compound matters, activity is light, which is backed up from what I am hearing from fellow property professionals such as lawyers, bankers and real estate agents”. “The tax announcements haven’t necessarily detracted investors further, but are just another compounding factor which suggests few purchases of new property by this sector” Mr. Donovan-Grammer said.
“On the upside for some, this is becoming a market suited to the first home buyer. Those who have bought over the last few years are struggling to get their money back and we’ve seen losses come through in the region of $30,000 to $50,000 for properties under the $400,000 mark. With top end properties, these losses are usually magnified. For example; a property in Omokoroa which sold for $1,240,000 in 2005 has sold in March for $890,000. A prime downtown Mt Maunganui property sold at the end of 2004 for $1,100,000 and sold again this year for $800,000.
On Papamoa Beach Road a property which sold in 2006 for $900,000 has resold this year for $600,000. These examples represent some of the more extreme cases”
Property values in the Wellington region increased by 6.0% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down on the 7.1% annual growth reported in April. The average sale price for the region decreased from $460,365 to $454,625.
Mr. Kerry Buckeridge of QV Valuations said; “Wellington’s residential property market could be described as fairly deflated at present. Our most recent figures indicate that sales prices are easing back from those achieved late last year, while sales volumes remain modest”.
“Feedback from the coalface supports this view. Owner-occupied property is faring best, although purchasers are becoming increasingly cheeky in their offers and are seeking serious bargains. I know of a real estate agent who recently sold several properties which had been lingering on his books for over six months. These properties only sold because the vendors were willing to accept offers $20,000 below their already adjusted asking prices” Mr. Buckeridge said.
“Since late last year, Wellington’s investment property market has been very inactive, and this holds true for May. Not only are investors making up a tiny proportion of buyer enquiries, they are also not listing. This sector of the market seems intent on doing absolutely nothing for the time being, perhaps still assessing their options” Mr. Buckeridge said.
“Wellington’s central city apartment market is presenting interesting trends. We are noting owner-occupier demand for larger, quality apartments. By contrast, the market for smaller investment apartments is wallowing badly. I am hearing that some buyers who made off-the-plan deposits for new apartments are failing to settle. We could well see values in this sector ease as a result” Mr. Buckeridge said.
Property values in Christchurch increased by 6.2% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down from the 6.9% annual growth reported in April. The average sale price for the city decreased from $367,688 to $359,597.
Melanie Swallow of QV Valuations said; “This latest decline of year-on-year growth for Christchurch’s residential property market is evidence of the seasonal adjustment that we have been expecting to see”. “The average sale price has also dropped over May. This reinforces anecdotal reports from real estate agents that vendors are making small reductions in their asking prices, with properties being priced to sell. Properties that are not sharply priced tend to struggle” Mrs. Swallow said.
“The budget announcements have had little effect on market activity at this point. There is still a lack of activity from the investor market sector, which could be good news for first home buyers. With less competition in the entry level part of the market we expect to see sales prices begin to soften. Now is also a good time to trade up as higher value properties need to be especially sharp with asking prices in order to attract interest” Mrs. Swallow said.
“We are heading into a typical winter market with the predicted easing in sale prices beginning to show in our sales figures. Overall sentiment in the market remains subdued” Mrs. Swallow said.
Property values in Dunedin increased by 4.8% over the past year (calculated over the three months ending May 2010 in comparison to the same period last year), down from the 7.5% annual growth reported in April. The average sale price in Dunedin decreased from $275,142 to $269,848.
Mr. Tim Gibson of QV Valuations said; “QV’s statistics for May indicate that Dunedin’s values have eased since April. This reduction in values has been fairly consistent over all areas of Dunedin and can be called similar to those recorded in November last year”. “Property values in Dunedin are now on average 3.5% below the market peak of July 2007, although pockets of the market have been hit harder. For example, a Mosgiel house purchased late 2007 for $215,000 recently sold again for $195,000. This shows a reduction of 7% from the initial 2007 sale” Mr. Gibson said.
“The reduced number of active buyers in the market can be seen as the main reason for value decreases over May. Consequently, this lack of demand is causing sellers to be more realistic with their listing prices and expectations in general” Mr. Gibson said.
“It is still too soon to see what implications the recently announced taxation changes will have on the local property market. Local real estate firms contacted have not seen a big influx of listings from concerned investors since the taxation changes, but they are still reporting low buyer demand for investment property” Mr. Gibson said.