According to the June quarter CoreLogic New Zealand Quarterly Property Economic Market Review released today market conditions slightly weakened.
The incoming macroeconomic data indicators revealed that as GDP growth slowed and the net migration balance continues to ease downwards (albeit from a high level), demand for property generally follows.
On the positive side, inflation remains low and is showing no signs of a meaningful pick-up anytime soon. CoreLogic research analyst Kelvin Davidson said, “This suggests that the official cash rate will stay on hold at 1.75% for some time to come (potentially late 2019 at the earliest) and with little evidence that higher offshore financing costs are affecting New Zealand, domestic mortgage rates should stay low and stable well into 2019. This will help to hold up property demand.”
“Within the property market itself, we’re seeing activity levels (e.g. valuation volumes, completed sales) are generally low around the country and the outlook seems pretty flat too.
“Given that, as well as the fact that affordability remains a problem in many towns and cities, it’s no surprise that property value growth has eased in the past few months. In April, property value growth across NZ was running at an annual rate of 7.6%, but it has now slowed to 5.7%,” he said.
Values in Auckland and Christchurch remain stagnant, and it’s only Dunedin amongst the main centres that is showing any sort of strength. The previously buoyant market in Wellington has cooled pretty sharply in the past few months, with values actually dropping by 1.3% from March to June.
CoreLogic proprietary buyer classification data shows that movers generally remain cautious and have a relatively low market share at present. First home buyers, however, are still active and have slightly increased their share of purchases from 22% in Q1 to 23% in Q2.
Amongst multiple property owners, those purchasing with cash have an historically high market share (13%), while mortgaged buyers are more restricted, due to the LVR rules and tightening bank credit policies. It is important to note that activity across all buyer types has fallen in terms of total numbers. It’s just that some buyer groups (e.g. first home buyers) have held on better than others, so their share of the market has risen.
Overall, Mr Davidson said, “Given the shortages of supply that have built up, and barring a big unexpected global shock, this orderly/controlled NZ property market slowdown, driven at least partly by credit restrictions, is unlikely to become a downturn.”
“Although building consents continue to rise strongly and KiwiBuild could add a bit of cream on the top for extra supply, property values look set to stay high in the medium term.”