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Business As Usual

Anyone expecting dramatic change in New Zealand’s market is set to be disappointed, with commentators saying more quiet times lie ahead, reports Miriam Bell.

By: Miriam Bell

1 October 2018

Attention never strays too far from the housing market in some form. Over the past month, the Government’s KiwiBuild programme has ramped up, along with its promise of boosted supply, and the accompanying commentary. But so too has the blow-by-blow analysis of every new data release.

While the impression this gives is one of significant movements up or down, in reality the housing market is trucking along as it has been for some time now. There is still a divergence between the big city markets and smaller regional markets. Overall price growth is slowing and activity remains subdued.

In line with this, commentators continue to say talk of a crash is well off the mark. But they are not expecting a return to the halycon days of the recent past, rather the slow flatlining of the market is set to go on.

Mixed Price Bag

It’s worth noting there has been some positive movement in prices, possibly in line with the usual seasonal lift seen in spring. But that movement is minimal – and it’s certainly not widespread across all data.

The August REINZ data shows that nationwide median house prices were up by 3.6% year-on-year to $549,000, although they were down by 0.2% from $550,000 in July. Supporting this, prices increased in 14 out of 16 regions across the country.

Three regions (Gisborne, Tasman and Manawatu/Wanganui) saw double-digit year-on-year price increases to achieve record median prices. Both Hawke’s Bay and Waikato continued to see strong year-on-year growth.

Further, it has Auckland’s median house price experiencing its first yearon-year price increase for six months in August. It was up by 1.4% year-onyear and by 2.7% on July to come in at $852,000 in August.

‘Low levels of supply coupled with a record low interest rate environment are driving modest value growth across most regions’ DAVID NAGEL

Another largely positive set of price data came courtesy of Realestate.co.nz. It records the national average asking price rose by 1.1% to $659,309 in August, as compared to July. It also shows there was record annual increases in asking price highs in 11 regions in August.

The Central Otago/Lakes District led the way with an 11.3% rise which left the region’s average asking price at $1,019,094. But realestate.co.nz has Auckland’s average asking price flat-lining in August, down by 0.5% to $954,324.

In contrast, both Trade Me Property (TMP) and Harcourts’ data had the national average asking price slipping for the third time in August as compared to July, but up year-on-year. Likewise, both had average asking prices in both Auckland and Wellington down.

The latest QV House Price Index tells a similar story. It shows nationwide values dropped by 1.6% in the quarter to August, leaving the national average value at $672,504. But, once adjusted for inflation, they were up by 3.3% year-on-year. QV general manager David Nagel says it appears to be business-as-usual across the national property market. “Low levels of supply coupled with a record low interest rate environment are driving modest value growth across most regions.”

But QV’s data presents mixed results for the main centres. Auckland values continue to decline, Christchurch values are still flat-lining, while Wellington’s values remain on the rise.

Many smaller provincial towns continue to see solid value growth, particularly in the lower North Island, southern New Zealand, including Dunedin (up 10.7% year-on-year) and Invercargill (up 13.3% year-on-year).

Modest Activity

Price growth data may have been a mixed bag in August, but so too were sales and activity on the listings front.

According to REINZ, nationwide, the number of houses sold in August increased by 3.1% (or 188), when compared to the same time last year (from 6,028 to 6,216). Nine out of 16 regions saw an increase in sales volumes year-on-year in August and those increases were enough to pull the national figure up.

But in Auckland, the number of properties sold decreased by -2.4% (or 45) from 1,837 in August 2017 to 1,792 in August 2018. Another star market to see a decline in sales was the Bay of Plenty where sales were down by 6.2% (or 29) to 438, which was the lowest number of sales for an August for four years.

Harcourts data shows it sold 1,913 homes throughout the country in August, which was up by 9.6% on July and by 5.5% year-on-year. It also has Auckland sales down by 15.59% on August 2017.

‘Overall price pressures are expected to continue to gradually moderate from here. But given the large, offsetting forces at play, there may be some bumps in the road ahead’ SHARON ZOLLNER

The fall in Auckland sales volumes was supported by Barfoot & Thompson’s August data. While it shows some growth in prices, its sales numbers in August were modest. At 795 they were down by 4.2% on July, although they were up by 2.3% year-on-year.

Barfoot & Thompson managing director Peter Thompson says traditionally, August is the month when the lowest number of sales are recorded in a year. “But the number of sales in the under $500,000 bracket have been climbing recently and were up to 12.6% of all sales in August.”

He points to the fact new listings in August were a quarter higher than those for July and 5.6% higher than for the same month last year as a positive for the Auckland market.

Realestate.co.nz’s data also has Auckland seeing an increase in new listings. Along with Canterbury, the region bucked the national trend in this area. Nationally, the number of new listings remained static with an increase of just 0.1% from August 2017.

There was also a fall of 1.6% in total housing stock on the market nationally in August, as compared to August 2017, according to Realestate. co.nz. Nationally, total housing stock levels now stand at 21,207. Further, nine regions hit all-time lows in stock levels in August. Those regions included Central North Island, Manawatu-Wanganui, Otago, and Southland.

Realestate.co.nz spokesperson Vanessa Taylor says the fall in housing stock levels nationally has led to a tightening of options. “While this seems on the face of it a modest decline, for the regions with all-time stock lows there’s not a lot of options and homes are being snapped up.”

Market Verdicts

So what does this mixed bag of data mean for the market going forward? Commentators are unanimous in expecting that subdued times, with no dramatic rises or falls, lie ahead.

Nagel says the market is currently experiencing polarising forces. “Key market drivers such as low interest rates, population growth and lack of supply are being countered by tightening credit conditions and a range of Government policy initiatives aimed at cooling the market.”

While winter has taken heat out of the market, they do expect spring to inject new energy – and more buyers and sellers - into the market, he says. “But we are anticipating value growth to remain flat or steadily grow across most regions.”

For ASB economist Kim Mundy, the housing market remains a game of two halves. Auckland remains subdued as it continues to transition toward a buyers’ market, she says.

“We see a risk that annual house price growth in Auckland slips into negative territory as uncertainty and affordability constraints continue to impact. However, provincial New Zealand is continuing to play catch up with a number of regions maintaining doubledigit house price growth.”

Mundy says that, overall, they expect the housing market to remain relatively subdued over the remainder of the year.

ANZ chief economist Sharon Zollner also sees a two speed market at play, with markets outside Auckland still playing catch up. She says house prices in Auckland continue to fall and houses are taking longer to sell, meaning further weakness in prices is possible.

“Outside Auckland and Canterbury, housing markets remain tight and it’s reasonable to expect that pressures in these markets will continue. Overall price pressures are expected to continue to gradually moderate from here. But given the large, offsetting forces at play, there may be some bumps in the road ahead.”


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