QV says annual house price growth slowed to 9.6% in past month; average price $467.5k; Auckland prices up 14.5%, also slower

QV says annual house price growth slowed to 9.6% in past month; average price $467.5k; Auckland prices up 14.5%, also slower

The growth in house prices has slowed in the past month, with the annual increase to January moderating to 9.6% from 10% in the year to December, government valuer Quotable Value says.

The average residential property price around the country was $467,499 as of January, compared with $466,022 in December.

In the hot Auckland market the average price was $695,215, compared with $693,549 in December. And while the latest month's figure gave an annual increase of 14.5% in Auckand, that is down from an annual rate of 15.4% in December.

The Reserve Bank's introduction of speed limits on high loan to value lending as of October 1 does seem to be having some impact.

And while the people at QV had expected that the LVR limits would have some impact on national figures, they didn't expect there to be any impact in Auckland - and have been surprised by the softening in that market.

The latest monthly property value index shows that nationwide residential values for January have increased 2.2 over the past three months.  This means they are now 12.8% above the previous market peak of late 2007. When adjusted for inflation the nationwide annual increase drops slightly to 7.9% and values remain below the 2007 peak by 2.8%.

The Auckland market is now 27.2% above the previous peak.  When adjusted for inflation values are up 12.6% over the past year and are 9.6% above the 2007 peak.

QV.co.nz research director Jonno Ingerson said the January index showed that nationwide values increased 0.3% compared with December, while a month earlier the increase was 1.3%.

"So while values are still increasing the rate of this increase has slowed considerably."

He said the pattern of slowing value increases was evident across Auckland also.

In most parts of central Auckland the January index showed a slight decrease in values in the past month, while across wider Auckland the rate of growth slowed. Most of the other main centres had also slowed "considerably" to the point where values were either flat or slightly decreased in the past month.

"While this is the first month that values appear to have slowed, and generally we would wait for subsequent months before claiming a trend, the timing does align to the LVR speed limits," Ingerson said.

"These speed limits have reduced the number of first home buyers active in the market, but perhaps more importantly have led to increased caution amongst buyers. This caution is offsetting any potential upward pressure on prices due to a lack of listings in many areas."

Ingerson said there had been widespread expectation that the LVR speed limits would slow down value increases, at least temporarily.

"However we did not expect values in Auckland to slow as they appear to have, given the supply demand imbalance. We also expected the other parts of the country, particularly provincial and rural areas, to be hit harder by the LVR speed limits, but at this stage this does not appear to be the case."

Ingerson said the predicted increase in mortgage interest rates in the near future was likely to also slow down values further.

"This may in fact already be affecting buyer confidence and contributing to the slowing we are seeing."

Here is QV's detailed breakdown of regional information:

Auckland

Values in the Super City are up 14.5% since January 2013 however there are early indications that the rate of increase in property prices across the Auckland region is slowing.

Waitakere is once again leading this increase with values up 19.2% year on year, with Manukau City coming in as the second best performer with an increase of 16.1% in the past year.

In the past three months, values in Papakura have risen the most with a 4.8% increase, with Franklin and Manukau Central close behind, with a rise of 4.6%. There appears to be an element of “catch up” in these movements as most other parts of Auckland have moved ahead strongly over the past year.

In comparison the old Auckland City had a significantly lower increase of 1.6% during the same quarter but values in the central suburbs are still 31.9% above the previous peak in 2007 which is one of the largest increases in the country.

QV Valuer Bruce Wiggins said “There is limited stock on the market at present and real estate agents are having to work hard to sell properties. Although first home buyers have had their wings clipped with the LVR caps, there is still activity and plenty of other buyers to fill the gap.”

“Land values have remained high and we are seeing fewer auctions than last year with many properties now advertised as ‘Price by Negotiation’.

We are also seeing increased numbers of auctions that are resulting in no bids or being passed in which will by its very nature will slow down the volume of sales as the time to negotiate a sale post auction is extended.”

“When properties are sold by negotiation it allows buyers to undertake more due diligence and some may play ‘hard ball’ when negotiating on price. This is particularly so with investors who tend to be more hard-nosed and may be willing to walk away from a property if it does not meet their investment requirements.”

Hamilton and Tauranga

Values in Hamilton city have remained relative stable with an increase of 1.4% over the past three months, and 5.6% over the past year and -0.2% below the 2007 peak. The Tauranga city market is increasing even more slowly with a 3.8% rise in values since January 2013 and a 1% rise in the past three months. The market there remains at 8.6% below the peak of 2007.

QV Valuer Richard Allen said, “The LVR restrictions seem to be taking hold with the signs being that there is less demand from buyers and also a lack of supply with less listings on the market.

Values are remaining up which is likely to be due to the lack of supply rather than due to high demand. First home buyers particularly seem to be struggling with this new environment.

Wellington

There are some early signs of improvement in the Wellington market but over the Christmas period the market has been relatively quiet.

Wellington West saw an annual rise of 3.8% compared to Wellington North, Central and South which were up 2.9% and Wellington City which was up 2.7%.

Values in Upper Hutt have increased 4.2% since this time last year compared to a 2.6% increase in Lower Hutt.

QV Valuer, Pieter Geill said, “There are now more listings coming on the market in Lower Hutt than Upper Hutt and open homes in Lower Hutt have reportedly had up to 15 to 20 people through however this has not yet resulted in a significant change in values.”

“There is a noticeable movement from buyers who are widening their search out of Wellington city looking for more affordable homes in outlying areas and this is creating more demand.”

Christchurch and Dunedin

Indications are that the rate of growth in the Christchurch market is slowing and in some areas is levelling off.

In the last three months values in the central, north and southern areas of the city rose 2.9%; the city and Banks Peninsula rose 2.6%, values in the Port Hills were up just 1.2% and values in the eastern suburbs increased just 0.8%. However, year on year values in the city were up between 12 and 14% on this time last year.

QV Valuer Daryl Taggart said “Christchurch city has been relatively quiet over the holiday period but things are now picking up again.”

“There is a noticeable flattening off of values in the Selwyn district with values 1.1% in the last three months, but post quake this area had a significant increase.  Values have risen 30.6% since 2007.”

“We are still seeing high demand for properties and with rents remaining high, there is also interest from investors as there are good returns to be had in the market at the moment.”

The Dunedin City property market is showing good levels of activity and reasonable demand. Values are now 2.5% above this time last year and there’s been a 1.6% increase over the past three months.

QV Valuer Duncan Jack said “We are seeing more activity at the upper-end of the market of $500k plus which is a sector that hasn’t been affected by the LVR changes.”

“There is less activity in the lower end of the market which could be the effect of the LVR caps kicking in.”

Provincial centres

Values in the provincial centres are variable with some experiencing growth, others remaining stable and in some cases a decline.  In the North Island, the Gisborne district was up 5.1% and New Plymouth was up 6.5% over the past year. 

In the South Island, annual growth in Queenstown was 5.6% and central Otago saw a 6.6% rise while Westland values rose 6.9% in the past year. Areas such as Southland, Invercargill and the Buller district have seen declines in values over the past year.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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41 Comments

If 14.5% is a slowing, I would love to see what an acceleration looks like.
SK

Obfuscation. Even falling house prices will show a positive year on year increase until they fall to the level of the previous year.
Concerned posts from property investors about locked out first home buyers in 3...2...1...

The party has to stop at some point - how long can we go on with houses earning more than their occupants?!
 

@RJF , yip  earning more from owing a home than earning a salary  ....  this is so true , by way of example our home increased notionally by about $120k last year , and by an average of $90k per year over the past three years .
Thats double the average annual wage totally tax free  .
Nice work if you can get it

Jeepers Auckland house prices are now 9.6% above 2007 peak prices after taking out inflation. 9.6% over 7 years. What a fantastic investment SK. Wish I had bought more of them.

Auckland up 32% since previous peak.
Enormous profit if using leverage wisely.
 

Shares are up a lot more than 32% since 2007 and that does not include leverage SK. You have to be pretty boring to be into houses for investment.

Highly leveraged and earning rent with no tax. It pains me to say it but these "investors" have done very well.
The good ones will know when to cash out.

One months statistics mean nothing.
Just like shares, averages or medians go up and down from month to month.
It's the trend that matters, and trends in the property market don't show up for at least 5-6 months.
We will know the trend better by mid year at the earliest.
By the way, show me the bank that will lend 80% long term on shares.
 

No need to borrow up to 80% for shares BigDaddy as equity investors generally have more financial horsepower and skill and probably bigger balls than people who invest in houses.
That would be like watching paint dry.

It is so good that we are all making loads of cash then.
SK

your houses are not worth anything SK until they are sold and the profits are in your bank account. Just like shares which are easier to sell. 
 

What currency do you hold your cash in after you sell your shares/houses?
Do you consider the value of the NZD to be more stable and more 'real' than the value of a peice of a profit making company or an accomodation providing house?

If you are chugging along nicely Gordos (fat in Spanish) well done.
You need not worry about my properties or bank accounts, I can assure you.
SK

You miss the point SK. I am not worried about your houses or bank accounts. No asset is worth anything unless it is sold and the proceeds are in the bank and we all like to think our assets are worth more than they actually are. This is the same for shares or houses or commodiities like gold.  What would happen to assets if we had another world event like September the 11th

You're NZD in the bank would lose 50% plus of it's value relative to the USD if we had another sept 11 event.
It's an illusion and imho wrong to assume money is the safest place to store wealth. The only reason very wealthy people (buffet) hold cash is to give them options for future aquisitions.
 

Sorry to have to be on SK's side here..  Leverage is a huge positive with housing during an up cycle. 
Take 10% dep. on 400k house in 2007 Vs. the same amount into the sharemarket (assuming you perfectively time the market).
Say you double your money in on the share market.  100% return.  Possible over the last 7 years. You made 40k cash.  No way can housing beat 100% gain?  Housing is only up 9% in real terms over this period how can it possibly be better?
Well, say 32% increase in property in nominal terms (inflation effects mortgage owed to bank equally as it does property price), property now worth 528k.  While the bank has paid for most of the house, you take all of the profits. 
$128k profit from initial investment of 40k. Over 200% return.
Great if you saw it coming, and from past posts there were many here who did (28 year old?, SK, BD et al).
The auckland boats sailed though.  The provinces, and wellington in particular are due next as was seen during the previous cycles.  This is when the equity gained by PI's in auckland is used to buy properties in the growing provinces (p.n, n.p) with good yields that pay for themselves.
 
 
 

I'm with SK and Simon
I will take my gains in Auckland since 2008 over the sharemarket any day 
I am already heavily diversified ;) - I own 100% of my shares of my non property company
Is there anyone game enough to pick the next bottom of the next market?
 

I am surprised you are happy with your gains of 9.6 per cent since 2008 SK after taking into account inflation. The sharemarket certainly beats that. The bigger the balls the bigger the return. Owning real estate is pretty easy to do and is less risky so that is reflected in the lesser return.  If you want a safe boring investment buy a house . Anyone can do that. If you want some fun and sensational returns buy shares. No tenants, no agents, no expenses .

Gordon... having read this thread you sound like the investing tough guy mate.
What's bugging ya?

Haha you the man Gordon!
From a young fella to an old fella- well done on your success. Trading is just not my cup of tea....trust me I'm not scared or lack balls-just slow and steady is my pace.

Your Spanish translation SK really sums you up.

SK , 28/29 and you go on about your returns as if they are incredible but they are pretty ordinary when compared to the returns investors like myself get from trading equities. All you need is a computer, cash of course and the time and the returns are unlimited. You guys go on as if you have found a special way to make money . In fact what you are doing is what any person with half a brain can do and does do . Buying a house is easy and that is why the returns are average. Buying shares in companies such as xero wynyard and Ryman is more challenging and therefore the return is greater . And so it should be. You have taken the easy safe route to make money along with thousands of others therefore your return is average. 24 per cent over 7 years before inflation. Whoopee. Equity investors can do that in a month. 

Hi Gordon, what are your stock picks for 2014...

Happy 123 I do not hold any stocks long term.  I am a trader by nature and trade daily on stocks that are flavour of the day such as Xero and Wynyard. Such activity is taxable of course. People go on about their house being worth this and their share portfolio being worth that. No asset is worth anything until it is sold and the proceeds are in the bank. That is the advantage of shares. They are easy to buy and sell. On the computer. If we had a major event again like September the 11th it would be interesting to see what assets would be worth then. I like to see actual profits in the bank. I would be first to admit it is very hard to buy at the bottom and sell at the top. That is a very rare occurence. Sometimes one has to sell at a loss and the trick is to keep such losses very minimal.

We know what happened after the last 9-11 event. Sharemarkets plunged. NZ property values doubled. Next question......

ST that is my point. Do not hold assets long term. There are days, periods of time when I only hold cash. Auckland house prices up 24% since 2007. Yawn.

Bluff and bluster from you in this thread gordan. 
Assets are worth plenty when they stream ongoing dividends.

Bluff and bluster alright. Nothing he says rings true. An embittered fantasist with his pants on fire. Day trader with no portfolio? Sure he is........and I saw a bigfoot once........

Portfolio means you are holding shares long term ST. I do not hold them. Made money out of Xero and then wynyard. Both are pretty fully priced now so looking for new opportunites to trade. An experienced trader is not in the market every day. I am retired under the age of 60 after a busy professional life and enjoying the opportunity to do what I really love. Trade shares. In the USA hundreds of thousands do it every day as a full time job. Not many do it in NZ as we are obsessed with boring old steady housing. Yawn.

Three things gordon.
 
1) Congratulations on your success.
2) Houses (and other assets) are worth something even if they are not sold. 
3) You call housing investment "less risky", "easy", "safe" and "boring". What are the alternatives? Risky, difficult, risky, exciting!?
Give me easy, safe and boring any day. 

Horses for courses M. You get the boring old returns because you cannot handle the risk and probably do not have the cash to invest in equities with. Traders certainly have exciting times and because of the risk they deserve better returns than buying boring old houses that are not worth what you pay for them.

Same here, more fun to actively manage a portfolio.  it's hard to look past the NZ tech stocks, GEO, SLI, WYN in my opinion all going to have a big year.  Also watching PEB and ATM and I recon the banks looking cheap right now. 

No offence but those stocks have performed terribly over the past 3 months, all of them are down signicantly.
GEO $2.30 then, down to $1.60 now
SLI $2.50 down to $1.85 now
WYN $2.80 down to $2.25 now.

Sorry 27.2% including inflation.

DTE on the asx has very large exposure to UK shale gas play and is significantly undervalued based on recent farm-in transactions occuring over there (has multiple upside events eg Airth approval, NSW turnaround, UK shale events).  FisherFunds held DTE at prices north of 50c and thought they were extremely cheap at 20c level (Frank Jasper- roadshow 2012).  They of course sweep them under the carpet when the price falls further (still own them from what I understand, just left off the newsletters, portfolio).  Very good buying at anything under 20 cent imho.  Pick some up for 13.5cents today while stocks last... And get a currency hedge on the AUD-NZD cross while you are at it......................................................................................................
As for holding periods, Buffets favourite holding period for a company is 'forever'.  Buffet also mentioned in 2012 that he would buy as much residential property in USA as possible if he was 'handy' and could maintain them himself. He wouldn't buy auckland property at these prices, but would be buying in areas like palmerston north where values and yeilds are good and population growth is occuring, and a future re-rating in line with whats happened in auckland is likely (cf 2005-2007, auckland rising at 5%, palmerston north at 20% plus).

Nice to look back at peoples past recommendations or predictions..
DTE on the asx has just received a take over offer from UK firm iGas equivalent to 18.98 cents AU per share. 
Nice 40% gain if you acted on my recommendation 3 months ago. 

Is IGas planning a dual listing , with an ASX presence , or are you gonna hafta open an account with a UK broker to trade your shares ?
 
... just a quick perusal of the IGas annual report showed alot of debt on their balance sheet ... whereas Dart Energy is cashed up and sitting atop a mega fortune in UK shale gas deposits ...
 
Reckon the New Hope Corporation are enriching themselves and screwing over the small holders in DTE ...
 
... London-to-a-brick NHC will emerge with the awesome NSW gas licence areas for pennies in the pound  to what Dart actually paid for them ( $A 100 million , give or take ) ...
 
British stockbrokers clearly rate IGas highly , with several " buy " recommendations , and no one saying " sell " ...

Sell at 16.5c today, or wait until igas deal complete and sell for equivalent of 19.1c AU....

This housing boom is only worthwhile if someone sold up and moved to somewhere cheaper i.e. sell high and buy low.  Sell high and buy high isn't that much fun..!

I agree - nothing to see here - move along.
Oh - but what about rugby or the flag etc?