The latest CoreLogic Quarterly Property Market and Economic Update has just been released, and in it we suggest that the overall property market outlook may be one of future uncertainty with the foreign buyer ban yet to make its full impact. As a researcher living and breathing property data, I’m suggesting that the buyer ban has the potential to dent values in areas such as Queenstown and Auckland. The flipside to that risk is a general undersupply of property (particularly in Auckland), with NZ’s currently high levels of building consents needing to continue for some time yet to close that gap. In the meantime, shortages of property will support values.
High values, low affordability and restrictions on credit availability have been limiting activity levels. There are however signs that sales volumes have found a floor and our expectation is that they’ll stay pretty steady into 2019. Indeed, gross lending flows to both investors and owner-occupiers have picked up in the past 3-6 months, suggesting the worst for sales activity is now behind us. A potential relaxation of the LVR (loan to value ratio) rules by the Reserve Bank later in the year (or next year) could provide some extra impetus too.
The report shows that over the quarter, values held up around the country, with stability in Auckland and Christchurch, and with continued growth in the other main centres (especially Dunedin and Wellington), and also in many main regional towns and cities. This controlled ‘soft landing’ for values seems set to continue. The latest figure for NZ-wide average values was $676,427 - which is 4.6% ($30,049) higher than a year ago.
In terms of who’s doing what in the market, CoreLogic proprietary buyer classification data shows that first home buyers (FHBs) and multiple property owners (MPOs) with a mortgage continue to be the key players of interest in the market. FHBs actually accounted for 24% of residential property purchases across NZ in Q3 2018. Not only that, but they now have the same share as mortgaged multiple property owners, and that’s something we haven’t seen before. Despite high prices, first home buyers are still managing to find a way to buy, with access to KiwiSaver deposits a key factor. Christchurch and Wellington are current favourites for FHBs.
Meanwhile, also at 24%, the high share of purchases accounted for by mortgaged MPOs shows that investors still see value in the market even despite extra pressures such as the looming removal of negative gearing and a potential long-term tax on capital gains/income. Goodall notes: “Although rents are rising, the historical evidence suggests that landlords don’t profiteer by raising rents at exorbitant rates, not least because a good tenant is too valuable to lose.
We also explore affordability in this report, with a heat map illustrating the widespread unaffordability of many suburbs in Auckland, despite limited (and even some negative) value growth in recent years. 109 Auckland suburbs have a median value above $1M, with Oratia and Botany Downs continuing to fluctuate in and out of the ‘million dollar club’, currently sitting at $1,001,600 and $1,004,500 respectively in October.
You can download your own free copy of the full report here, including detailed commentary, graphs and heatmaps.