New Zealand housing values have risen 2% in the year to June 2019, with the nation’s property growth supported by low mortgage rates and a rising population. CoreLogic’s Quarterly Property Market & Economic Update New Zealand Q2 2019 paints a picture of two property markets - Auckland and other major centres.

While Auckland’s housing market is down 2.7% in the 12 months to June 2019 (-1.2% in the second quarter to June 2019), Dunedin is up 12.2% up in the 12 months to June 2019 (2% in the second quarter to June 2019). This quarter has shown a continuation of Auckland’s soft demand while the more affordable regional markets have continued to perform well.

New Zealand’s broader economy is respectable and the lending market is good for borrowers with more rate cuts forecast, but housing affordability in Auckland is still low with the average property value at $1,027,113. The volume of sales fell dramatically in Auckland (-10% year on year) and Tauranga (-9%) in the second quarter of 2019, but rose 11% in Dunedin.

This is the sort of pattern you would expect to see as the cycle winds down to a more subdued level, which is in line with the overall growth outlook of the New Zealand economy.

First home buyer lending is up 17.2% in the year to June 2019, while investor lending is down 7%. New Zealand’s first home buyer activity is relatively strong - with first home buyers’ market share at 24% - on par with previous record highs prior to the Global Financial Crisis.

First home buyers and investors are taking their time and waiting to find value before they pounce and with listing volumes down in the bigger cities (bar Auckland), it can be slim pickings.

In the other regional centres, there is much better value and therefore more activity. Overall, the broader economy in New Zealand has strong GDP growth at 2.5-3% and steady employment figures, but low wage growth will keep a lid on property price rises.

It looks like dwelling consents may start flattening in the next six to nine months pointing out that the year to May 2019 has seen nearly 35,000 new consents issued, the highest figure since December 1974.

New Zealand’s construction boom has seen a shift away from traditional freestanding housing stock towards apartments, flats and townhouses, especially in Auckland, while Queenstown has seen dwelling consents spike to around 8% of its existing property stock.

With employment up by 1.4% to March 2019, the labour market is looking solid.

Any rate cuts we get for the rest of the year won’t put a rocket under property price growth, but the country’s still-growing economy and stabilising population growth rates will support the market. New Zealand’s population growth has stabilised at 1.8% annually in the first quarter of 2019, after a slowdown from 2017. Natural population growth is at around 26,500 on an annual basis.

The property lending upswing has tapered back in Q2, mostly due to investor lending, which has fallen $421m annually. Owner-occupier lending has grown, driving more by larger loan sizes than more loans.