The NZ housing market showed signs of strengthening across the board in September with most main urban areas experiencing a lift in property values. The CoreLogic QV House Price Index showed that nationwide, average property values rose by 0.4% from August to September and lifted the annual growth rate a touch from 2.3% to 2.4%. 

Fifteen of the eighteen areas categorised as ‘main urban areas’ or ‘provincial centres’ saw a lift over the month with the southern cities of Dunedin and Invercargill the best performers; each rising by 1.8% according to the September index results. Over the last year property values are 12.8% higher in Dunedin and 13.3% higher in Invercargill.

Property values in Auckland have also shown signs of new life with the quarterly percentage change (0.0%) moving out of the negatives for the first time in 2019, however values remain 1.9% below the same time last year.

At a more granular level we can explore the change in property value over the last year, using the recently released ‘mapping the market’ web page. The mapping application highlights geographic trends; for example the weakness in Auckland was greater in the North Shore - especially coastal areas, as well as some of the more expensive suburbs closer to the CBD, including St Mary’s Bay (-9%) and Herne Bay (-8%). 

NZ average property values

At the other end of the scale, there are parts of the city, particularly down south, where values have actually increased over the last year. Favona (3%) and surrounding Mangere East (2%) and Otahuhu (1%) are prime examples of growth occurring in the suburbs where property is not as expensive as other parts of the City.

In Wellington City, there are signs of recent momentum beginning to wane. While property values have increased 4.1% in the past year, the flat (0.0%) quarterly result indicates potential fatigue, as buyers consider their options and look to move into one of the surrounding cities. Both Hutt City (13.2%) and Upper Hutt City (15.3%) have seen significantly greater growth over the past year – no doubt assisted by lower property prices. The average value in Wellington City is now $827k, compared to $608k in the Hutt and $575k in Upper Hutt.

Rolling annual % change in property values

Only Napier, Whangārei and Whanganui bucked the broader trend of growth in property values over the month. In Whanganui’s case, the drop of -0.7% was balanced by the growth experienced over the longer term. Values here have increased by 0.8% on the three month measure and 12.3% over the last twelve months.

The gradual drop in property value in Whangārei (down -0.4% over the month) is an extension of a longer term trend (-0.9% three months), however values are still 2.6% higher than a year ago.

In Napier, values tracked sideways over the month of September and property values are down -0.9% over the last three months, but still up 8.2% over the last year.

Interestingly, nearby Hastings experienced almost twice the rate of growth (15.3%) as Napier in the past year, which has taken the average value in Hastings to $535,219 – less than $18,000 short of that in Napier ($553,128) – a slim margin compared to history.

CoreLogic Head of Research, Nick Goodall said “There are definite signs of new life in the property market as consistently low mortgage interest rates continue to assist potential buyers in the market. 

Annual change in dwelling values, Provincial Centres

Listings remain low, which is contributing to price pressure around much of the country. Even in Auckland, where listings have increased over the longer term (5 years), they’re lower than at the same time last year and this has meant price pressure where demand is relatively high. This is generally in the least expensive areas which appeal to a number of buyers (first home buyers and investors alike).”

The lending environment has also eased over the past month. The official cash rate (OCR) remained at 1.0% last week, but indications of a drop in November remain. So the ‘lower for longer’ outlook will ensure mortgage interest rates stay attractive to borrowers. The reduction in the serviceability rates, set by the banks themselves, will also mean more active borrowers. Although with business confidence very weak, and doubts persisting about the overall economy the enthusiasm for people to take on more debt may be waning.

Average Property Values, Main Centres

Looking forward, we do expect sales volumes to lift throughout the rest of the year, although areas with higher property values may not be able to keep up the same growth. 

We then wait on the Reserve Bank’s next Monetary Policy Statement (on 13 November) for a potential change to the loan to value ratio (LVR) restrictions. We wouldn’t be surprised to see a loosening of the investor limit, as long as the property market (and lending figures) don’t show too much life over the next month.