Lending restrictions and looming interest rate rises are subduing rampant house price growth, but question marks remain over whether the slow-down is here to stay.
Quotable Value’s (QV) December House Price Index shows residential property prices throughout the country rose by 1.3% over the three months to December, and 12.5% over the year, with the national average hitting $627,905.
While the average is at a record high, the annual growth rate has nudged down from 14.2% in December 2015.
Looking at Auckland, home values increased by 1.5% in the three months to December and 12.2% over the year, reaching $1.047 million.
However the year-on-year price growth was the slowest since January 2015, with prices actually inching back 0.4%, or $4200, from November to December.
Barfoot and Thompson data released on Monday showed a similar trend in the Super City, with sales volumes in December falling to their lowest level since 2011.
QV national spokesperson, Andrea Rush, says: “December saw a continuation of the trend of a slowing rate of value growth, activity and demand.
“This trend has been seen in many of the main centres since the introduction of the loan to value ratios (LVRs), which require a minimum 40% deposit for investment properties.
“This coupled with the annual Christmas holiday period slow-down has led to a decrease in values in some parts of Auckland, Hamilton, and Christchurch since November."
Will the LVR-led slow-down stick?
However Rush is unsure whether national house price growth will continue to ease throughout the year.
“A similar trend of plateauing/decreasing values was seen in the Auckland market over the summer period last year following the introduction of the (30%) LVRs for the Super City region only,” she says.
“In 2016, the Auckland market then picked up in March, which is usually the busiest month of the year, and it’s possible we may see this happen again.
“However, if interest rates continue to rise during 2017 this may further reduce demand from investors and lead to a longer period of lower value growth.”
QV’s Auckland general manager, Jan O’Donoghue, says it already “appears some investors are choosing not to buy more property as they have lower expectations of potential capital gains during 2017”.
“But any slow-down will be balanced by the fact the market is still being driven by strong net migration, relatively low interest rates and a lack of supply compared to demand, particularly in Auckland,” Rush says.
O’Donoghue adds Auckland properties with sub-division potential (under the new Unitary Plan) are still selling well and achieving record prices.
“This includes properties in areas that are close to up and coming town centres and have good transport links, in suburbs such as Mt Wellington and New Lynn,” she says.
QV general manager, Richard Allen, says the Hamilton market has become one of two tiers.
Poperties over $550,000 are attracting buyers, but those under $550,000 are proving less popular, as LVR restrictions are deterring investors. This has however provided an opening for first home buyers.
“We have also noticed an increase in the number of movers who are up-selling homes under $550,000, and buying more upmarket properties of up to around $700,000 with the capital gain they have made,” he says.
QV valuer, David Hume, says the announcement and immediate implementation of the LVR restrictions in July saw a cooling off in the Tauranga market, although things have picked up in recent months.
“Rents have continued to increase throughout 2016, with an average three bedroom house now renting for $100 more than it did two years ago,” he says.
“The prestige market has shown good growth over the last six months with a number of sales in excess of $1.5 million, on the back of a strong stable economy and cashed up Auckland buyers looking for a lifestyle change.”
In Wellington, values are continuing to rise faster than in Auckland, but at a slightly slower rate than prior to the LVRs being introduced.
QV valuer, David Cornford, says first home buyers are active and seem to be taking advantage of the fact there are fewer investors in the market.
He also notes the effect of the earthquake appears to have largely disappeared in the housing market.
QV valuer, Damian Kennedy, says the market is quiet in Christchurch, with December listings down around 20% from December 2015.
“Well-presented homes in the $500,000 price bracket remain popular as do entry level homes,” he says.
“Some first home buyers who are buying properties with parental support are finding they are being affected by the LVR changes also, as the support they are receiving from parents is at times being classed as an investment.
“A lot of people in Christchurch are under-insured and need to increase their level of insurance. However, there appears to have been little effect in terms of people addressing this even in light of recent earthquakes.”
LVRs haven’t affected the Dunedin market, as house prices and sales activity have remained strong throughout the Christmas period.
“This is likely to be due to the fact the Dunedin housing market offers a much lower entry level and price point than the other main centres. Thus it’s easier for investors to find a 40% deposit to purchase there and investors have remained active there,” Rush says.
|QV House Price Index December 2016|
|Territorial authority||Average current value||12 month change%|
|Main Urban Areas||751,460||12.3%|
|Total New Zealand||627,905||12.5%|
|Auckland - Rodney||929,162||14.0%|
|Rodney - Hibiscus Coast||903,672||12.4%|
|Rodney - North||957,501||15.6%|
|Auckland - North Shore||1,218,254||11.8%|
|North Shore - Coastal||1,395,709||12.1%|
|North Shore - Onewa||975,593||11.1%|
|North Shore - North Harbour||1,184,533||12.4%|
|Auckland - Waitakere||840,639||12.4%|
|Auckland - City||1,218,979||11.2%|
|Auckland City - Central||1,062,115||11.7%|
|Auckland_City - East||1,520,349||10.7%|
|Auckland City - South||1,104,779||11.5%|
|Auckland City - Islands||1,021,594||12.7%|
|Auckland - Manukau||904,516||13.6%|
|Manukau - East||1,161,823||13.7%|
|Manukau - Central||688,248||11.1%|
|Manukau - North West||781,663||15.4%|
|Auckland - Papakura||681,953||13.3%|
|Auckland - Franklin||659,906||13.8%|
|Hamilton - North East||681,272||21.3%|
|Hamilton - Central & North West||499,701||20.0%|
|Hamilton - South East||484,566||19.2%|
|Hamilton - South West||467,435||19.0%|
|Central Hawkes Bay||251,001||14.6%|
|Wellington - Central & South||697,056||21.6%|
|Wellington - East||738,555||18.2%|
|Wellington - North||614,937||23.1%|
|Wellington - West||815,985||24.0%|
|Christchurch - East||368,548||0.7%|
|Christchurch - Hills||656,669||0.5%|
|Christchurch - Central & North||585,705||3.2%|
|Christchurch - Southwest||474,260||4.1%|
|Christchurch - Banks Peninsula||513,275||4.8%|
|Dunedin - Central & North||368,259||13.5%|
|Dunedin - Peninsular & Coastal||308,938||11.4%|
|Dunedin - South||338,291||15.9%|
|Dunedin - Taieri||371,192||16.4%|