On the back of a favourable starting point for housing affordability, property value growth has recently accelerated across Christchurch as well as Waimakariri and Selwyn. We’ve certainly heard a number of anecdotes that younger households are considering moving to the area simply because of better affordability. However, this upturn in values could still continue to be capped somewhat by the still-high level of construction around Greater Christchurch, especially in Selwyn.
After looking in more depth at the Queenstown property market’s rebound from its post-lockdown weakness a few weeks ago, we now turn to Christchurch (and its surrounds) – an area that’s been fairly flat for a number of years, but has recently shown signs of a stronger upturn. Indeed, as the first chart shows, rises in average property values have accelerated sharply in Christchurch (9.0%), Selwyn (7.7%), and Waimakariri (9.5%) in recent months, to the point where growth in each area is currently at its highest level in 6-7 years.
In Christchurch itself, the growth in median property values since March – i.e. the COVID era – has been reasonably broad-based, with only a few parts of the central city and some outer suburbs (e.g. Sumner, Northwood) lagging behind a little. In Selwyn, it’s been Lincoln and Tai Tapu leading the field, while Waimakariri has been driven by Rangiora and Kaiapoi (see the second chart/map).
So what are the likely factors driving value growth? Clearly, low mortgage rates have been a boost in and around Christchurch, just as they are everywhere else. Also in tune with other areas of the country, it has a low level of total listings on the market, and any new listings are really only enough to replace achieved sales at the other end of the pipeline, or of course are snapped up quickly themselves. In suburbs such as Spreydon, Redwood, and Somerfield, median days to sell has recently been 14 or less.
Meanwhile, competition amongst first home buyers (FHBs) and mortgaged investors is likely to have been a factor in Christchurch too. FHBs have been the key buyer group for the past three years now, and accounted for 27% of purchases in 2020, but a fair degree of the recent price momentum is likely to have come from mortgaged investors – now 26% of the market, up from 23% in 2019 (see the third chart).
But perhaps the most important factor behind Christchurch’s upturn has been the more favourable starting point for housing affordability – something which can’t be said for many other parts of NZ. Indeed, a typical mortgage payment for an existing homeowner currently absorbs 24% of gross household income in Christchurch (27% in Waimakariri, 26% in Selwyn), well below 31% nationally. And those aspiring to be in the property market will be finding it easier in Christchurch too, with 6.7 years currently required to save a typical deposit, roughly two years less than the national average of 8.6, and far less than 10.1 in Auckland (see the fourth chart).
Looking ahead, the pipeline of new dwelling consents around Greater Christchurch (especially Selwyn) suggests that the recent upturn in values may not turn into an outright boom – which given the current climate of general housing unaffordability across NZ and intense political pressure is surely a good thing. Indeed, Christchurch and its surrounds shows exactly what can happen with housing affordability when land is opened up and new properties are allowed to flow onto the market.