According to the December CoreLogic QV House Price Index, property values in New Zealand grew by 1.2% over the last three months, a minor reduction on the rate of growth at the end of November.
A slight drop (-0.2%) in the Auckland index for December took the annual rate for all of 2018 into the negatives (-0.4%) for the first time in just over a year. This further illustrates the weakness of the current Auckland property market as unaffordability, restrictive lending and Government influence continues to impact the market.
CoreLogic Head of Research Nick Goodall explains: “The market we witnessed leading into the summer months stayed consistent in December, albeit with the usual reduction in overall activity as well. Responsible bank lending standards remain and have been a defining factor of the property market in 2018. However, solid market foundations also continue, both of which shape our outlook for the market to perform similarly to last year.”
Goodall adds: “These foundations include low mortgage interest rates (and a relaxation of LVR rules for both owner-occupiers and investors), still-high (albeit slowing) population growth, a strong labour market and a remaining deficit of new properties being built, despite very encouraging consent figures.”
“Counteracting these factors are proposed tax changes for investment property, potentially an increased requirement for banks to hold greater capital against their loans and the elimination of foreign buyers in the NZ property market. These all contribute to our expectation of growth rates remaining constrained, while not necessarily doing enough to see values drop.”
Within Auckland, the most expensive areas saw the greatest weakness over the full year. North Shore and Auckland City (isthmus), with average values above $1.2m, saw -1.1% and -1.0% drops in 2018. Manukau saw the greatest increase over the year, although still a restrained 1.2% (in the wider context), with the outer areas of Rodney and Franklin experiencing a similar increase of 1.1%. Papakura, at 0.6% and Waitakere at -0.2% round out the rest of the super city.
Meanwhile, the Tauranga property market finished the year strongly, with 1.0% growth in the December index, however the year of ups-and-downs is well encapsulated by the relatively low annual rate of 3.9%.
Hamilton property values also travelled a rocky road in 2018, but despite a minor drop (-0.2%) in the final three months of the year, the annual rate (5.0%) was greater than in Tauranga, where the average value ($721k) is more than 26% greater than Hamilton ($571k).
Investors remain a strong presence in Hamilton, with 39% of sales to this group in the final quarter of 2018. This is back to levels seen earlier in the decade, after their activity had previously increased to 50% of sales in 2016 off the back of Auckland specific LVR limits driving investors down SH1. The modification of the LVR limits to be applied nationwide brought a swift drop in activity, with investor share in Hamilton dropping to less than 40% since Q2 2017.
Growth in the wider Wellington property market petered out in the final few months of 2018, however with a persistently low level of listings on the market, it would not be a surprise to see values lift again in the early months of 2019. This was heavily influenced by weakness in Wellington City (quarterly growth of 2.3%), while Upper Hutt property values showed no signs of slowing down (5.7% quarterly growth) and Porirua also rounded out the year with greater than 5% growth (5.3%). Lower Hutt experienced some volatility over the final few months of the year, but still grew by 4.2% in Q4.
Dunedin property values grew continually and consistently throughout the year, to finish 11.2% higher than 2017. First home buyers have strengthened their presence in the city with a record share of sales in Q4 (28.2%), and investors (34.2%) continue to take advantage of a lower average property value ($435k) which provides a higher gross yield (4.3%).
In Canterbury the outer districts continue to outperform most of the city areas, with Banks Peninsula the only exception - although the annual growth rate of 2.9% for 2018 simply reversed the losses experienced in 2017. Values in Waimakariri grew by 2.0% over the year, while in Selwyn annual growth finished up at 1.7%. Christchurch Central & North property values were the worst performing in the City (-0.3%) while the rest of the city saw very modest gains of roughly 1%.
Across the provincial centres as a whole, annual value growth (9%) continues to outstrip the main centres (1%) when grouped together. Rural centres also saw value growth increase an average of 6% over the year.
Whanganui sustained a high level of growth throughout the end of the year to finish the year with a record average value of $277k – an increase of 17.3% since 2017.
Value growth in the provinces has fluctuated around the country. The annual rate of growth increased in 5 centres, decreased in another 5 and stayed consistent for the other two. This helps show the variable patterns of similarly sized areas, and illustrates the need to understand a local market before investing in any property market.
In the December index for Hastings there was a significant increase (7.2%), with properties valued under $400k in particular seeing very strong sales price. This is a section of the market often dominated by investors and first home buyers, although movers have increased their presence in Hastings over the last few years.
Mr Goodall said, “The December QV House Price Index closes out the 2018 property market in a relatively similar way to the year before: continued weakness in our largest cities and inconsistent growth elsewhere.“
“2019 is likely to bring more of the same, with many eyes on the Government, Reserve Bank and the Banks themselves as they hold so many of the influencer cards.”
"Naturally, we also consider whether there are similarities to Australia, with the property market going through some tough times across the Tasman, but while we have the same banks operating here, regulation has been more stringent – which has led to a controlled slowing of the market, not a drop“
“In Auckland in particular, there’s still a deficit of supply from years of under-building, which is likely to guard against a significant drop in values, given still-strong population growth. The lending environment will remain another key market fundamental; we’ve just seen a loosening of the LVR restrictions and with interest rates likely to stay low, (certainly in the short term), we’re in a relatively accommodating position: which will allow for a continuation of modest property growth.”
Disclaimer: In compiling this publication, CoreLogic NZ Ltd has relied upon information supplied by a number of external sources. CoreLogic does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause whatsoever and limits any liability it may have to the amount paid to CoreLogic for the supply of such information.