The REINZ monthly Property Report for June 2019 reported a 1.7% annual lift in property values across the country. This is according to the REINZ House Price Index (HPI), which is a preferred measure for evaluating property market performance over median selling prices because it measures the value movement of all properties in an area, not only those that happen to have sold in the month being reported on.

The latest REINZ results are consistent with the CoreLogic Home Value Index where the results for June reported that growth across the country was constrained. The annual rate of change for Auckland slipped slightly, according to the REINZ HPI, from -3.3% at the end of May to -3.5% at the end of June. This market weakness is further highlighted by a continued reduction in sales volumes.  Year-on-year sales volumes were down -3.8% across the country, and -3.2% in Auckland. However, the reduced number of property sales in Auckland is actually relatively minor considering for most of this year the annual drop has been greater than -16%. It’s now a case of the old adage ‘it’s harder to fall much further when you’re already at a low level.'

REINZ CEO Bindi Norwell commented that “the number of properties sold in New Zealand during June was the lowest for the month of June in 5 years” and went on to explain that “some people are reluctant to list their property for sale without somewhere to move to” which is slowing down the property cycle.

Total listings on the market do remain close to their lowest levels across most regions, although there are some signs of improvement; 9 of 15 regions have more properties listed for sale today than a year ago.  We are only a few weeks away from their typical seasonal trough so we’re expecting listings activity to improve from August.

REINZ also reported a continuation in the lengthening of the number of days to sell a property. In Auckland it’s now taking an extra 5 days (from 40 to 45 days) to sell a property compared to June 2018. Outside of Auckland, the median number of days to sell is shorter at 39, reflecting a better fit between inventory levels and buyer demand which is also supporting price growth.

The strength in property value growth continued in Invercargill (20.4% p.a.) and Palmerston North (17.1% p.a.), while Dunedin remains the strongest growing main centre (14.7% p.a.). This is a moderation from the annual rate reported at the end of May however (18.0%).

Meanwhile the Queenstown-Lakes District is now reporting the lowest annual growth (outside Auckland) of 1.9%. As CoreLogic reported earlier in the month, the Foreign Buyer Ban, introduced in October 2018, is really having an impact now. Higher levels of construction, at a time of reducing value growth provides further reason for caution for the popular holiday destination.

In general, the outlook for the market remains firm, if not unspectacular. Interest rates remain low but serviceability tests continue to limit the pool of eligible borrowers. According to the CoreLogic Buyer Classification series first home buyers are a persistent presence but not at the expense of investors. 

Investors appear to have a renewed confidence in the market a couple of months after the Government ruled out a comprehensive capital gains tax, although some will need to take note of the confirmation that the tax ring-fence for rental property losses is now law (back-dated to apply from 1st April). We don’t expect this to have a significant influence on the market, because although it will undoubtedly make it less attractive to some investors, this could well create opportunity for others.