News & Research

Value growth remained subdued throughout March

10 April 2018

According to the latest QV House Price Index stats powered by CoreLogic data, there is still relative restraint in growth across the market with only a 0.7% increase in the nationwide March figures.

Auckland experienced a minor lift of 0.2%, while Wellington was also fairly subdued with only 0.6% growth.

So, with it being almost 18 months since value growth hit the brakes I thought it pertinent to analyse the contrasting behaviour of some our cities through the recent cycle.

Full results across the country are available here, but I’ve chosen to put Auckland, Hamilton, Napier, Wellington, Christchurch, Selwyn and Invercargill under the spotlight today.

Firstly looking at the North Island centres:

There are a number of things that stick out to me:

  • Auckland had a ‘pre-boom’ growth phase from 2012 to the end of 2014, when no-one else did. Its second and most significant acceleration began in 2015 and went through to a peak rate of 24.4% by the end of that year. And the growth rate has gradually slowed ever since, with a particular fall-away throughout last year.
  • Once Hamilton ‘went’ it went big. From 4.4% annual growth at the end of June 2015 to 18.2% in just four months, it then continued up to 31.5% annual growth at the end of July 2016. The other side of the purple mountain is just as steep down.
  • Wellington and Napier followed very similar trajectories all the way until mid-2017 when Wellington slowed and Napier held. 
  • Wellington held at its peak rate of over 20% for 9 months to the end of May 2017 before slowing and flattening from September last year.

It’s never sat well with me to talk about Auckland ‘going first’ and the regions following as I believe it’s far too simplistic an analysis. 

Certainly they all missed the boat from the first mini growth phase and second time around all three featured here behaved very differently. The big question now is how long Napier can keep growing at such strong rates. Affordability has certainly deteriorated over the past year. But given the buoyant tourism and horticulture sectors in the area, it’s unlikely that property value growth will come to a screaming halt just yet.

Down south we again see a range of different performances. I’ve re-included Auckland for context and was also interested in Selwyn’s cycle, next to Christchurch and then Invercargill for yet another contrast.

 

Once again there are plenty of intriguing trends.

  • Post-earthquakes Selwyn saw a very strong response in value growth, up to 14.1% annual growth at the end of August 2012.
  • Christchurch took a bit longer to see a similar increase in growth and it rose to 12.7% at the end of 2013, as the upward effects on property values from the loss of supply finally outweighed the downward effect of the population outflows.
  • Value growth in Invercargill has remained constrained in comparison to many other areas, but has held up more recently.

So what have we learned? First up I think it’s to recognise that we are well past the peak growth phase of this cycle. Yes, some of the smaller centres are seeing continued growth, but given the length of time this has occurred it’s unlikely to last much longer, especially with the tightening of credit through stricter serviceability tests at the banks. 

The other is just how much Auckland has slowed in the last two years. And given not much will change this year, in terms of the lending environment, demand drivers and the well covered supply response, I’m not expecting that growth rate to lift much again any time soon. As we touched on last month though, the lack of growth is not citywide and while volumes are significantly lower than the last few years we are still seeing some buyers remain active so I’m picking a flat year rather than a major drop.

What could change that relaxed view? We’re watching interest rates, the migration balance with Australia, and investor listings. 

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