News & Research

CoreLogic February Property Market & Economic Report

22 February 2018

CoreLogic today reported that during February, New Zealand’s property market was slow to get started with early results sluggish for both demand and activity.

Head of Research Nick Goodall  said “While the market is yet to fully  swing back into action, the prevalence of public holidays in January and early February impacted on key measures – however, there’s more to it than a just the holiday vibe.  

“All major centres are experiencing a reduction in year on year activity with Auckland the farthest back -total listings on the market have started to lift again but partially because the number of days that properties stay on the market is lengthening.” 

According to the results in the February Property Market & Economic update (covering the main economic factors influencing the housing market such as sales volumes and activity, values, and active buyer types in both the national and main centre housing markets), movers have bounced back from their nationwide Q4 2017 slump, while multiple property owners have remained consistent with 37.5% of sales. Goodall notes: “We have previously noted the reducing share of those multiple property owners needing a mortgage to purchase but that group actually had a stronger month in January, accounting for almost two-thirds (66%) of multiple property owners purchases (up from 62%).”  

First Home Buyers remain consistently active in Auckland but incredibly strong in Wellington with an impressive 42% of Lower Hutt’s sales in January going to First Home Buyers: “Access to KiwiSaver funds and grants are assisting these buyers, while low interest rates are helping to keep mortgage repayments manageable” 

The three months value growth rate hit 3.8% nationwide at the end of January, the fastest pace for over a year. “Property values nationwide remain a very mixed bag: Dunedin is modest but consistent, Christchurch is very subdued, Wellington is on an upwards trend, Tauranga has  started to grow, Hamilton is flattening and Auckland has experienced a spike - but one that is unlikely to be maintained” Goodall comments.  

Auckland’s building consents continued a strong upwards trajectory, with an annual lift of 15.9% in 2017. Goodall however notes: “This statistic will be welcomed by the Government, however as noted in the recently commissioned ‘Stocktake report’, three barriers to housing supply exist: planning, infrastructure and development. Anecdotal reports of an industry close to capacity appear to ring true.” 

With the quality of rental stock continuing to be a Government focus, buyer activity in Dunedin was of interest: “A lift in mortgaged multiple property owners (including those from Auckland) is surprising given the generally accepted lower quality of rental stock in this student city.  With policy focusing on the need to improve rental quality, many were expecting areas like Dunedin to become a less attractive investment option. Certainly an area to keep an eye on”. 

Additional report hightlights include:  

  • Sales volumes: Nationwide sales volumes are subdued (6% down year-on-year) and very weak in Auckland. Christchurch experienced a late-spring and summer resurgence with the 3 previous months each up on the (admittedly weak) prior year. 
  • Property values: Values increased across most of NZ in January. Auckland and Tauranga continued a slight resurgence but Hamilton continued the six month trend of remaining flat. Wellington is consistently growing, as is Dunedin.  Looking further back to the previous 12 months, the areas with the most growth were Hawke’s Bay, Horowhenua and Masterton. Timaru and MacKenzie were the exceptions to Canterbury’s year of poor growth, whilst further South the best performing value growth area was the sparse Southland District, where the main towns are Winton, Te Anau and Riverton.  
  • Rental market: Annual rental growth stabilised at 4.9% in December and January and gross rental yield continues to hover along just over 3.0% (as it has done for 18 months+). Renters in Wellington and Tauranga have seen an annual rent increase of around 7%. 
  • Listings: Year on year, Wellington’s listings are weak, while Auckland is starting to see an upwards trend. Days on the market is increasing.     
  • Buyer Classification: First Home Buyers nationwide haven’t started 2018 as strongly as they ended 2017, but are still active in Auckland and very strong in Wellington.   
  • Market Controls: mortgage interest rates again took a dip in January, and with the official cash rate projected to remain below 2.00% until the end of 2019, it’s good news for borrowers. New loan-to-value ratio (LVR) restrictions are now in place, with the deposit requirement for investors dropping from 40% to 35% and the share of high LVR lending (above 80% LVR) to owner occupiers increasing from 10% to 15%. The expected market impact is minimal, but it will contribute to a small lift in demand from those who were previously unable to satisfy the LVR requirements. 

To download the full report click here.

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