According to the October CoreLogic QV House Price Index, property values in Wellington City grew by 3.9% over the last three months. This takes the annual rate of capital gain in Wellington City to 9.6% and illustrates a similar trend to the rebound seen last spring, when the annual rate was a slightly higher 10.0%, after recovering from another underwhelming winter for property values.

A shortage of total properties listed for sale remains a constant in the Capital, so properties that are listed for sale are still attracting competitive interest - which is, in turn, seeing an increase in values. Spring has also seen the normal seasonal lift in new listings being added to the market however with a consistently low number of days to sell the impact of new listings is reduced.

Strong population growth (much like the rest of the country) and a buoyant labour market, supported by the public sector (and associated high-paid jobs) is boosting demand. First home buyers aren’t as active as last summer, as many look slightly further afield for better value, but investors, accounting for 41% of sales in Q3, continue to find value in the City.

Index results as at 31 October 2018 (Source: CoreLogic)

Meanwhile, property values continued to increase in Dunedin, with the rolling quarterly rate of growth strengthening to 2.8% (from 2.4% previously). Similar figures were also present in Hamilton (2.8% quarterly growth), however annual growth here remains below 6%, well short of the 10.5% experienced in Dunedin.

In Auckland, property values continue to hold reasonably steady – up 0.2% over the month but down 0.3% according to the quarterly measure. The sub-regions of Auckland are generally recording flat conditions as well, with six of the seven areas seeing quarterly growth range from -0.6% to +0.5%. Only Franklin sits outside this range, at 0.9% growth. Franklin remains the most affordable of the old ‘cities’, with an average value of $671k and is mostly represented by the town of Pukekohe, which makes up 42% of all properties in the area (and to a lesser degree Waiuku with a further 20%).

Rolling Change in Property Values, National (Source: CoreLogic).

Christchurch meanwhile, saw zero change in property values over the month. Similar to Auckland, this is a continuation of a long-term trend with the annual growth rate in Christchurch remaining below 1% since June 2017. Questions remain about whether there’s a risk of oversupply in Christchurch and the broader region surrounding the city, however with values enduring their hold and properties continuing to sell, the answer remains ‘not quite yet’.

It is important to note that the number of building consents being issued is hovering above ‘normal’ levels prior to the 2010/11 earthquakes, despite the bulk of the residential rebuild well and truly over and the market already appearing ‘in balance’. So the risk of oversupply in some areas of the city/region (or for some types of property) in the future does linger.

House Price Index, Main Centres - relative to December 2003 (Source: CoreLogic).

Values in Tauranga are showing signs of life, but growth remains inconsistent as the average value holds in the low $700,000’s. Annual growth sits at 3.3%, the same rate reported last month.

Across the other main urban areas, many of last month’s top performers remain the same. Whanganui is the pick of the bunch with the annual growth rate accelerating to 17.5%, the strongest growth rate to be seen here for more than 12 years.

Recent activity has picked up from investors, however, movers (people buying and selling within a six month period) also remain a key presence in the market. First home buyers are holding their own at around 23% of sales in Q3 but this is well down on a peak of 29% of sales in Q3 2015.

Invercargill has retained an annual growth rate higher than 13%, although conditions have cooled marginally from the prior month’s rate.

Palmerston North property values also continue on an upward trajectory and in the ‘winterless North’, Whangārei looks to have bounced out of a subdued winter for property values to see 3.6% quarterly growth leading to an annual rate of 11.3% - the greatest figure for just over a year.

Meanwhile, Napier’s foray into sub-10% annual growth was short-lived as the rate rose back to 10.3% at the end of October. It seems there’s more life in the Art Deco Capital yet!
At the other end of the scale, but clearly not cause for concern by any stretch, New Plymouth is still seeing annual growth exceeding 5% (more than half of our main centres), and Hastings hasn’t fared quite as well as it’s coastal neighbour Napier, with ‘only’ 6.6% annual growth in property values.

Annual change in dwelling values, Territorial Authorities Main Urban Areas.

The QV House Price Index for October indicates the current growth cycle is not completely over yet. The banks continue to compete strongly for mortgages via their fixed interest rates and this is enabling buyers to continue participating in the property market. Borrowers are still subject to greater scrutiny of their income and expenses but once they satisfy the bank’s criteria their mortgage payments should be relatively manageable due to historically low mortgage interest rates.

We’re yet to see the same increases to mortgage rates that other countries are seeing, including Australia. And given our proximity to Australia, there has been some speculation that the downturn being witnessed across the ditch will be replicated here.

For now, this looks unlikely - with 80% of New Zealand borrowers favouring fixed interest rates. This is almost in complete contrast to Australia where the majority of their lending is on floating rates. This greater exposure to mortgage rate movements in Australia can lead to borrowers’ payments increasing particularly for investors who have favoured interest-only loans, many of which are now approaching their 3-5 year term expiry and transitioning to principal and interest payments.