ANZ's economists see history repeating, with the Auckland house market now starting to demonstrate the under-performance it had relative to the rest of the country in the mid-2000s.
In ANZ's latest Property Focus publication, in an article headed 'who's hot and who's not', chief economist Cameron Bagrie says the "clear take-away" from looking at the regional markets around the country is that Auckland is bearing the brunt of the recent slowdown in housing market activity.
"...Numerous other regions [are] still performing well and playing catch-up; although unsurprisingly, some are doing better than others," Bagrie says.
"This Auckland underperformance is a story that will persist if the 2005-2007 experience is repeated.
"Capital (and people) naturally flow to regions where valuations look more attractive - and the gap between Auckland house prices and the rest of the country is extreme."
In commenting on the country generally, Bagrie said the property market was softening, but particularly in Auckland "as the combination of a turn in the interest rate cycle, less credit, LVR restrictions and severely stretched affordability act as headwinds".
"There is still incremental support for prices to lift after a lull courtesy of population growth and a fundamental mismatch between supply and demand. We think the former factors will be the key influences over the coming year and expect house price momentum to remain subdued."
Bagrie said Auckland house prices had been "the main talking point across New Zealand’s housing landscape for some time", having increased at unprecedented rates since 2011. The Auckland region House Price Index doubled from the start of 2011 to the end of 2016.
"Recent LVR restrictions have had a direct impact on investor lending and the HPI is now moving backwards, with prices lower than they were six months ago.
"When compared with the rest of New Zealand, it looks like 2004-2006 all over again, with Auckland underperforming the rest of the country."
Bagrie said there was "still daylight" between the median sales price in Auckland and the rest of New Zealand.
"...That’s a huge incentive to buy somewhere outside of Auckland if you’re an investor, and cash up and move if you’re retiring."
Bagrie noted that the volume of Auckland house sales "has been thumped", down 26% since this time last year (on a three month average basis).
"The rest of New Zealand is down also, but by far less (-18% y/y)."
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