CoreLogic New Zealand Senior Research Analyst Kelvin Davidson writes:

The Wellington property boom which ran for around two and a half years appears to have hit a roadblock in the past few months. We’ve seen values dip by 1.2% since February, compared to increases of 2.9% in Upper Hutt, 1.4% in Lower Hutt, and 0.9% in Porirua. This soft patch for the city has already been much more noticeable than the lull of June to August in 2017, (refer adjacent second chart). This analysis is based on the CoreLogic e-valuer measure which provides a market value for all properties at any point in time. We then take the median value of these for each suburb at the start of each month.

CoreLogic Wellington City Property Values

So what are the patterns at a suburb level showing for Wellington? Firstly, it’s important to note that not every part of Wellington is sluggish. For example, Aro Valley has seen average values rise by 2.2% over the past three months, and another seven suburbs have seen gains of 1-2%. Of the top 10 suburbs for growth shown in the third chart, nine have property values that are below the city’s average ($754,924). Roseneath is the only high-priced (i.e. above average) suburb in the top 10 for growth.

CoreLogic Wellington City Property Values Changes
By contrast, the suburbs that have seen the biggest weakness in the past few months have a tendency to be those in the higher price bracket. Indeed, five of the 10 suburbs where prices have fallen the most have values that are above the Wellington average. These include Seatoun, Karaka Bays, and Mount Victoria. Wilton and Miramar have values slightly below the city’s average, but have still seen falls recently.
CoreLogic Top 10 Wellington Suburbs

This broad suburb level picture, with expensive suburbs experiencing weaker growth is consistent with other breakdowns of the data. For example, across Wellington as a whole, the higher priced properties (>$850,000) have only seen gains of 0.7% over the past year, whereas the $650,000-$850,000 bracket has risen by 7%.

CoreLogic Bottom 10 Wellington
In reality, Wellington’s slowdown shouldn’t come as much of a surprise. After all, as we’ve already seen in Auckland, as prices rise ever-higher and affordability deteriorates, a natural handbrake emerges. This seems to be showing up in the higher-priced suburbs.

On top of that, the tight serviceability tests currently being applied by the banks (e.g. can the borrower afford their repayments at a mortgage rate of 7%) are an added headwind. 

For the remainder of the year, the likely outcome would seem to be a further flattening out for Wellington values, especially since activity levels have also cooled lately and the previously-keen first home buyers have pulled back a bit.

However, it will be interesting to see whether listings also start to rise as owners looking forward to further capital gains potentially start to revise their assumptions and look to sell. This would tend to feed back into further weakness for prices.