A record summer is in store for a scorching hot property market says CoreLogic, as prices leap by the most ever in Q4-2020 and the largest quarterly growth rate in sixteen years

A record summer is in store for a scorching hot property market says CoreLogic, as prices leap by the most ever in Q4-2020 and the largest quarterly growth rate in sixteen years

Content supplied by CoreLogic


The NZ property market has shown no signs of letting up through the final month of the year, with near-record growth registered across the country, according to the most complete and robust measure of property value change, the CoreLogic House Price Index (HPI).

The HPI for December shows nationwide property values continued to accelerate over the month, increasing by 2.6%. This takes growth in the final quarter of the year to 6.1% - a rate not bettered since the three months ending February 2004 (6.6%).

In Tauranga the quarterly rate of growth exceeded ten percent (10.2%), which is an extraordinary figure and something last witnessed in May 2004 (10.5%), when the average property value was just over $350,000. That average value has now increased to $876,122 – up from less than $800,000 at the end of September 2020.

The quarterly rate of growth in Masterton is yet another step higher at 17.4%, while other provincial centres to exceed 10% quarterly growth include Whanganui (11.2%), Porirua (10.9%) and Gisborne (10.4%) with Palmerston North just shy at 9.6%.

Looking back to the start of the year, property values in Gisborne have increased by more than thirty percent (30.4%), which has seen the average property increase in value by almost $120,000 to smash the half million dollar mark at the end of December ($514,212).

The factors influencing such a rapid rate of capital gain include record low mortgage rates and tight inventory which has seen demand outweighing supply. Stronger than forecast economic conditions have buoyed consumer sentiment at a time of unprecedented global uncertainty. It is clear that New Zealanders are looking towards property as a safe investment and the most attractive asset for wealth accumulation.

Furthermore, areas with a lower average value typically mean a greater number of eligible buyers and hence greater competition leading to stronger growth.

With consistent messages regarding the need to protect that wealth, coming from both the Government and the Reserve Bank of NZ (RBNZ), the risk factor of property investment has, on the face of it, reduced, which only encourages greater investment.

Without any major policy change regarding property in the works, the long term affordability of the property market is reliant on significantly increasing supply, which is a slow moving factor. So for now, all indications are that the fervent growth in property values will continue throughout the summer at least.

Later in 2021 the potential flow-on impact of such strong growth will eventually be outright unaffordability reducing the pool of buyers able to borrow enough to participate in the market. At this point there will need to be an adjustment of expectations from both vendors and buyers, but with a full pipeline of buyers right now, and a lack of attractive wealth generating alternatives out there, this point looks some way off.

This may lead to greater political pressure on the Government to ‘do something’ in order to address the excessive demand. An extension to the Brightline test is a likely possibility and the RBNZ have asked to have the option of including debt-toincome restrictions (DTIs) in their tool kit for ensuring financial stability so that could happen too.

The loan-to-value ratio (LVR) restrictions are already scheduled to return on 1 March 2021, but with the impact likely to be limited, we may see the restrictions tightened further, potentially requiring property investors to have a 40% deposit.

Detailed HPI results for the main cities and larger provincial centres follow, with data for every TA available in the accompanying spreadsheet.

Main Centres

The steep lift in values throughout the last quarter is evident in each of the main centres.

Even the comparably low rate of quarterly growth in Christchurch (3.4%) is relatively significant, being the highest since December 2013 (3.8%). The success of removing red tape to build houses faster (following the 2010/11 earthquakes) and keeping a lid on long term value growth provides the compelling case to implement similar changes around the rest of the country.

Meanwhile the aforementioned rate of growth in Tauranga is a remarkable turn-around, after value growth stalled in the third quarter of the year (0.1% to the end of September). The CoreLogic Buyer Classification series reveals multiple property owners using a mortgage have been increasing their share of sales in the harbourside city (26% Q4 so far, up from 23% in Q4 2019). However owner occupiers moving house remain a core market participant, accounting for 32% of sales so far in Q4, many of which are locals upsizing.

Value growth in the Wellington area has gone from strength to strength, with the record 8.1% quarterly rate taking the annual growth rate over 15%, or in excess of $110,000 over the 2020 calendar year. Porirua, with 10.9% quarterly growth and the western suburbs (including Karori, Kelburn and Northland) at 9.7%, have shown the most significant recent uplift. In Porirua first home buyers, with a 35% share of sales in Q4, are a strong force in the market.

Property in Auckland, even at an average value of $1.14m, is also firmly on the rise, with 6.0% growth over the final quarter of the year. This equates to an average increase of more than $60,000 in three months. Multiple property owners are evidently back at the bank to secure funding for property purchases, with 30% of sales to this group so far in Q4. The last time their share was this high in Auckland was in Q3 of 2016 (32%) – immediately prior to the nationwide investor deposit requirement increasing to 40%. Such a large proportion of activity from investors may foreshadow consideration from the RBNZ to return to these limits at some stage in 2021.

Looking more granular, growth across the Super City has been relatively consistent, especially in the largest four localities, as quarterly growth ranged from 5.6% in Waitakere to 6.3% in both Manukau and the old Auckland City boundary. Within the old Auckland City area, the southern suburbs have seen the greatest growth over the last three months, at 7.2%. This includes the likes of Mount Roskill, Mount Eden, Avondale, Mount Albert and Onehunga.

  Change in property values
  Month Quarter Annual Average Value
         
National 2.6% 6.1% 11.1% $788,967
Main centres        
Auckland 2.4% 6.0% 9.1% $1,142,700
Hamilton 2.3% 4.1% 11.7% $674,562
Tauranga 6.8% 10.2% 14.8% $876,122
Wellington Area 3.2% 8.1% 15.4% $861,794
Christchurch 1.6% 3.4% 6.2% $539,561
Dunedin 1.9% 6.4% 13.1% $582,269

Provincial Centres
(ordered by descending quarterly growth rate)

  Change in property values
Territorial Authority Month Quarter Annual Average Value
Whanganui 6.1% 11.2% 24.9% $416,417
Gisborne 3.5% 10.4% 30.4% $514,212
Palmerston North 3.4% 9.6% 20.3% $581,944
Rotorua 4.3% 8.8% 19.2% $595,638
Kapiti Coast 4.7% 8.4% 18.3% $746,081
Hastings 2.0% 7.3% 13.5% $640,232
Whangarei 2.7% 6.4% 14.4% $627,357
Napier 3.7% 6.4% 14.0% $659,947
Queenstown 1.3% 5.7% 0.3% $1,206,301
New Plymouth 1.9% 5.4% 11.8% $554,334
Invercargill 2.5% 5.3% 13.5% $379,483
Nelson 2.3% 4.8% 9.2% $697,658

Corelogic house price index

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66 Comments

19
up

Great news. The bigger the bubble the bigger the burst.

Let's pray Jacinda, Grant and Adrian are held accountable for the economic and social wreckage.

What about the accountability of Cruella and co?

12
up

Helen or Judith? We voted Jacinda into transform our economy. I’m not ready to give up on her yet, but equally I’m not going to let her off with deflection. She has the mandate, the power and no excuses.

12
up

It's time to raise interest rates - we now have inflation.

15
up

I don't know who "Cruella" is.

Let's focus on those who wilfully set the policy.

Jacinda is going to eclipse Muldoon with the damage caused by her economic incompetence.

When does Parliament get back into swing for 2021? When will we expect to hear Labour's plans...the end of summer realestate boom or?

10
up

We already know Labour's plans. Do nothing.

House prices must only ever go up.

That's a long piece of string

The bank leaders. They're the ones who ultimately expand the money supply through mortgage lending. If it blows up, the taxpayer will pick up the pieces. Savers too of course

13
up

It's not a bubble. Because what you're measuring that property in is being devalued. If a NZ dollar was worth the same as it did last year - then yes a bubble, but the NZD is being deliberately DEVALUED against asset classes. That's not a bubble, thats a devaluation. And if your cash stash is being devalued at around 15% per year - what do you do? You put it into an asset class with capital gains tax free returns. Housing in NZ is an investor space as created by the Government and Reserve Bank. And also unfortunately a place people need to live. You decide the ethics on that one. But don't call it a bubble. It's scorchingly hot currency devaluation against investable assets. Which is fine, unless you're a wage earner and believe in democracy and freedom and are against central planning an economy.

Agree. Another way to say it. Totally loss of confidence in the local fiat currency.

It's engineered.

It sure is, Tesla is now worth more than Toyota, VW and GM combined. It's out of the stratosphere. Elon Musk could buy all other car companies if he wanted to. This is because USA has done monster QE programmes and it's gone straight into shares. Nothing has real world value anymore, it's all about getting out of paper money and buying shares or property to ride the great currency devaluation.

Wrong Tesla is making no money every year in comparison to the other car makers. Its just a sign of a crazy market and Tesla shares are in reality pretty worthless. If Tesla attempted to "Buy" the other car makers their share price would crash, its pure speculation money. The market is so distorted at present it can only lead to bad outcomes when it finally corrects.

Bingo

You fooken nailed it.

Sadly it's now too big to burst...will never be allowed to correct.

Its not to big to burst, its to big to LET it burst, it will kill the economy so the government WILL NOT let it burst. Once you understand that, buy a house thats what I did.

What’s going to pop it?

Un-popable. Think of a Titanium Balloon.

Interest rates rising. And/or Central banks stop printing money on overdrive.

All cap assets are in the same boat. This is a global bubble.

Google search the 2019 stock market crash.

Google the amount of usd in circulation over the past ten years.

Its a bit of a pickle.

10
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"Near record growth" Not quite, 11.1% vs 15% in Nov 2015. Calling it "growth" is yet another euphemism when we actually have a very valid word for it: "inflation" or even better "hyper-inflation". The former has positive connotations and as journalists we should be aware of what we write.

Circumstantial inflation at most BTW, we will have to see what the effects of both growing unemployment, LVR restrictions and stabilized mortgage rates will be in the next few months.

Will the government do something about this? Unlikely. Will they need to do anything at all to revert the trend? Also unlikely. Just concerned what they might think is a good idea to do to keep the bubble and inequality growing.

Yes. All this really represents is monetary debasement.

Wow bought in Tauranga just at the right time last September, its now gone mad. I'm told average price is up $100K in a year. Batshit crazy in the middle of a 1 in a 100 year Pandemic.

11
up

Yep, everyone is understanding now this is crazy, it is the main requirement for bubbles to burst.

Congratulations.

The Law of G̶r̶a̶v̶i̶t̶y̶ NZ House Prices 'What goes up, must go up' It's what kiwis expect.

Yes at the moment the feeling is house prices and share prices are guaranteed to go up. I see our largest power company is now on a PE of over 50, unbelievable.

If voters had been paying attention to what John Keys government he would be swinging by a noose. I took a big slice of all of those.

10
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Yes Jacinda said that people expect house prices to rise. Thumbs up for Labour, its the only thing they are going to deliver on for their next term.

They can say what they wish, truth is that just a bunch of misinformed people and whatever investors are left still want that at this stage.

Hey all. Anyone know if we'll still get access to the data by reference to areas within each city? i.e. North Shore, Coastal North Shore etc?

I think it's about to get tougher from here. Wages have been increasing despite peak productivity (per hour worked) being 2012 but I can't see that'll remain sustainable. RBNZ will support house prices but the average wage will have to adjust back from this overshoot.

Incomes, as in wages or salaries, are going nowhere. That's the next surprise. It's called 'income shock.'

Mark my word, at the peak of Pandemic Jacinda instructed for the pay cut and the rest of the team. I hope that those pay cut will be channeled into public servants significant pay rise this 2021 onwards.

10
up

What else is expected....

This (Housing ponzi) is supported and promoted by Jacinda, Atden... So why ve surprised.

Thank you Jacinda Arden and Mr Orr...

11
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No sign of letting up.... Really why is anyone surprised.. This is what Jacinda said
..

And its signals like this sent from the government that's pouring petrol on the fire. The only way to reign this in now is to raise interest rates, pretty easy to do eh ? Problem is will they do it ? psychologically rising house prices makes people feel good and go out and spend those "Gains" on paper using more paper. I'm not expecting rate rises because all of this is seen as pumping the economy as part of the "Recovery", yeah a bit like a recovering drug addict more like.

Incorrect Carlos, NZ is not yet in the state of recovering drug addict. It's still in the stage of pumping more drugs into the system, and this can only be good from Healthcare point of view.
To accelerate the result.

Property price in NZ is only catching up to the rest of the world. 1M won’t take you very far in many major cities in Asia for example yet the quality of life is so much better here. Even our low wages seem high in comparison.

Couldn't agree more, the higher the property prices, the higher of living standards, educations, healthcare etc. - it's just simply a no brainer 'of flow on effect' from wealth.
NZ can beat those most expensive cities in the world in term of pricing, but yet will still maintain/improve the current better quality living.. which in turn will invite more influx of offshore capital.

Better standard of living for who? The working poor who are spending more and more of their disposable income on housing?

You forgot to put the word 'sarc' after it all, otherwise, it looks like you made a really ignorant comment.

If your point was true, then Hong Kong' with house prices at 22x income would have everything you mention, and the like of NZ at a close second.

how about roading infrastructure, does that improve too?

This is delusional. These Asian cities are heavily populated financial centres on major trade routes - that’s why they’re expensive. We’re a farm clinging to the edge of the world, with some pretty views and a small, unproductive population. If you want an inexpensive good lifestyle, go to Southern Europe.

Are you happy for poor people to be selling their daughters into prostitution in order to survive? You can shove that comparison you-know-where

NZ recent block buster housing inflation counted back in comparison the past 16years, is really count to nothing compare to the BTC which already surpass the $33k/coin, as both clearly attract a stellar result performance, there's still long way for housing to catch up here, so only dumb govt try to assert control via LVR, DTI, Brightline, healthy home/anti-landlord regulations etc. - This is a good opportunity by Lab govt, to get rid all of it. Remember with supply in mind, remove the RMA, into negative OCR and soon FLPs into housing by RBNZ.

Yeah, let's get concreting over the food basket.
I'm sorry, but if there is one thing greed needs, it is legislation, right out of existence preferably

It's actually too much of the wrong legislation that has created this mess.

What we need is less, and better legislation so that Adam Smith's 'invisible hand' of a truly free market can work.

Even Adam Smith himself acknowledged that the free market would deliver inequalities and haves and have nots. He also came from a time when women had no franchise and people owned slaves, and mothers made your path easy at no cost. https://www.thecut.com/2016/06/katrine-marcal-adam-smith-dinner-intervie...

Yes, any system is not perfect, but more legislation makes it more imperfect.

Not necessarily, if we had carte blanche on everything, we would just bloody destroy everything. We are not very good with looking after things if we don't have rules about them.

I never said no rules. It's about having fewer better rules.

You trolling?

An economics year 12 wouldn't seriously make these comparisons between housing and BTC.

You cannot compare gains in Bitcoin to gains in NZ housing because how many people have $1million plus in Bitcoin ? gains are irrelevant when you only have $500 in Bitcoin, who cares even if it goes up 100% ? The bank will not give you a mortgage to buy Bitcoin, why not if its such a great investment ? Thats right it doesn't physically exist. Bitcoin could go to zero value overnight, your fully insured house is low risk. Housing has been a vehicle to get rich in this country and thats been a problem for people that think that owning one is a human right.

11
up

The idea of using housing as a never losing casino MUST be smashed to pieces and everything within a government's power MUST be put into place to see to it that houses once again become first, second, last and everything in between, as HOMES for people, that people can afford.
Anything less will see this govt lose a lot of support, count me as part of that.

Yes that is correct but in your comment immediately above you mention about not building over 'food basket.' ie no sprawl. If you are suggesting that density alone is the path to affordability, then you are actually supporting unaffordable housing.

The present system with its focus on restrictions actually encourages the development of high-quality farmland or drainage of environmental wetlands and forces the price of all housing up.

I make no apologies for saying either thing. Personally, I would rather a population policy and limiting our numbers to such that we don't need to do either thing, but if it is to be one thing or another then it has to be higher density housing in areas already destroyed by us. The only thing I want destroyed is the rentier culture that has grown in this country, it has just about ruined it.

The rentier culture exists because of forced density, not because of density per se, ie restrictions both up and out. These restrictions allow rentier prices which force people to the fringe for affordability.

All prices are set at the fringe, if the fringe is expensive, then everything from there all the way into the CBD is a multiple of that. That's the way it works in any city in the world.

It's counter-intuitive, but if you really want to make it more affordable for people to live closer in (at whatever density), then make it more affordable to live on the fringe.

Far more of the country has been destroyed by dairy farms than has been by residential development. We have a low population density. We can and should double it.

Just change the rules around borrowing against property and change the tax incentives and it's done. It's not hard. You think they don't know what they are doing, but they do. They are preserving the pristine investor space that is NZ Property to be the plaything of big moneyed interests. People are not the concern of any government in NZ. Unless we all go Waikeria.

Any parallels to 1986? America’s Cup & NZ on a high, sharemarkets bubbling high, nek minute ...

https://businessdesk.co.nz/article/listed-companies/looking-back-euphori...

That bubble was driven by euphoria, this one is driven by fear...

I dunno - when your Uber driver is euphorically discussing his latest investment property purchase ... you know somethings peaking

A bit like Joe Kennedy and the shoeshine boy