Well the property market has kicked into 2020 in much the same fashion it finished 2019. Average values continue to rise across the country, with the annual growth rate increasing to 4.4% at the end of January. That’s up from the 2.0% lull in June 2019, and the strongest annual growth rate since September 2017. It’s also worth acknowledging that quarterly growth did take a very minor dip at the end of January, but I think that’s probably reflective of reduced summer activity rather than anything ‘real’ in the market.
Dunedin continued to set the pace for capital gains, with annual growth increasing beyond 20% at the end of January, while in Christchurch there are signs of the first real growth in the market since the middle of 2014.
I reckon the comparison between Dunedin and Christchurch is a really interesting one, as Dunedin property now has a higher average value than in the Garden City – for the first time ever. It’s even more intriguing when you consider the respective ages of the property stock in each city. Christchurch went through a significant renewal of stock following the earthquakes almost ten years ago now, while Dunedin’s stock is older by comparison.
So what are some of the underlying factors? A lack of listings in Dunedin, on top of a strong economy and relatively high gross rental yields – 4.0% versus 3.2% nationally – have contributed to the continued growth. Meanwhile, the availability of usable land and expansion of ‘greater Christchurch’ into the likes of Selwyn and Waimakariri districts have increased supply for locals, and also enabled many to build new.
In Auckland, the recovery in property values which began in the third quarter of 2019 has continued, with annual growth finally hitting the positives (0.3%) after remaining in the negatives for all of 2019. Property values also strengthened in each of the other main centres as well as most of our main urban areas – particularly in those areas with lower average values. To my mind, the stand-out was Gisborne, where property values grew by more than a quarter (25.7% or $83,000) over the last 12 months, to take the average property value over $400,000 for the first time. Property investors continue to see value in the market of our easternmost city, accounting for 38% of sales in the final quarter of 2019.
In general, the resurgence in property value growth, in conjunction with a lift in confidence, an increase in investor activity, and growth in overall lending, are all factors that will be reassuring the Reserve Bank that their decisions not to ‘fuel the fire’ at the end of last year were correct – and I agree. These decisions were holding steady the Official Cash Rate (OCR) and leaving the Loan-to-Value ratio restrictions alone.
In the first OCR decision of 2020 they also held flat, with the only left-field consideration appearing to be whether to provide stimulation to the economy in advance of any impact caused by the coronavirus outbreak. In the end, they played conservative, but they’re also standing ready to lower the OCR from 1.0% if necessary.
Looking further into 2020, we now have an official election date to work towards – the 19th of September, and the political games are already being played! From a property perspective, affordability will no doubt play a big part throughout the lead up, as will the role and effectiveness of any Government to influence supply. Either way, with low unemployment, high net migration, and perhaps most importantly low interest rates, the outlook for homeowners continues to look relatively rosy, but it won’t be easy for those aspiring to get that first rung on the ladder.