The latest QV House Price index for July shows that the speed of property value growth is slowing. This time last year nationwide property values were increasing 8.1% year on year, now they are 7.6% year on year. However, it is in the last three months that the slowdown is more evident as nationwide values increased 2.3% compared to 3.1% for the same three months last year.
The slowdown is more pronounced in Auckland where values increased by 2.1% over the past three months which is around half the 4.1% increase in the same three months last year. Tauranga and Dunedin have continued their very gradual increases over the past three months, Christchurch has slowed down, and Hamilton and Wellington have dropped slightly. Most of the rest of the main provincial centres are also now dropping in value, suggesting that the LVR speed limits, increasing interest rates, and a drop in sales volumes are now beginning to bite.
So what does this mean for where the market might head? During and after the GFC sales volumes dropped to very low levels. From 2011 volumes started to recover, but by the time the steam came out of this in late 2012 we were still well below normal levels of turnover. Since late last year the number of sales has once again started to drop year on year. At the same time net migration is at the highest level since at least the 1980s, building activity is sluggish, and confidence is good. Given this, it is unlikely that sales volumes will drop much further, and in my view will begin to recover again by early next year. The increase in sales activity will limit any potential major value drops. That being said we are likely to see value erosion in rural North Island areas, while in Auckland it is hard to see values dropping far.