It’s inescapable. New Zealand’s housing market is not what it once was. There’s slowing price growth and subdued sales nationwide, albeit with some regional hot spots still powering on. Given the headwinds of looming tax and tenancy law change, does it all mean the market has finally turned?

There’s many who believe it has and that a wholesale decline in property values is coming. Economist Cameron Bagrie recently said people shouldn’t be sugarcoating Auckland prices and that there are early signs Auckland is starting to follow the lead of the Sydney and Melbourne market. He did add, however, that it was likely an Auckland decline would be a light version.

Yet, in the face of the latest price and sales data, most commentators have a more tempered, and rather less dramatic, view of the likely outlook for the market going forward

Super City Price Decline

Bagrie’s words certainly spring to mind when looking at January’s price data. That’s because, across the board, the data clearly shows Auckland’s prices have declined. According to the latest REINZ data, Auckland’s median price has fallen to its lowest point in over three years. It has the region’s prices down by 2.4% to $800,000 in January, as compared to $820,000 in January 2018. It is Auckland’s lowest median price since February 2016.

REINZ chief executive Bindi Norwell says they are watching closely to see whether the region’s price fall is just the usual summer slowdown or whether it’s the start of something wider. “What we can say, is that it’s too early to call this a trend and it’s too early to confirm whether the Auckland market has actually turned.”

The song remains the same in other data. QV’s January House Price Index has Auckland’s value growth down by 0.1% over the past quarter and by 0.9% year-on-year, leaving its average value at $1,045,775. In Realestate.co.nz’s data, the Auckland region’s average asking price remained flat: it was up by a mere 0.7% to $960,482, as compared to December 2018.

Barfoot & Thompson also recorded Auckland prices as continuing to flatline in January. Both the average sales price ($927,181) and the median sale price ($827,500) were down on December, by 2.4% and 5.4% respectively.

The agency’s managing director Peter Thompson says January’s prices reflect the state of the market seen in December, which saw prices edging back. “But there is certainly no indication that there is a major decline in prices and we continued to sell properties across all price bands.”

Two-Tier Market At Play

Around the rest of the country, the price data was somewhat more mixed. It clearly highlights the difference between some of the big city markets and many of the regional markets.

In the REINZ data, Christchurch also saw an annual decline in house prices. The Garden City’s median price was down by 0.7% to $431,900 in January, as compared to $435,000 in January 2018. In contrast, the country’s other 14 regions saw annual increases in their median price, with five regions recording new record median prices.

Those regions were Waikato (up 12.6% to $550,000), Manawatu/ Whanganui (up 21.7% to $348,000), Marlborough (up 16.3% to $477,000), Otago (up 6.4% to $475,475) and Southland (up 15.6% to $277,500). Wellington also saw strong annual growth of 12.2%, which took the region’s median price to $562,000 in January, as compared to $501,000 the year before.

However, QV’s data leaves little doubt that property value growth is slowing around the country. It has nationwide values growing by just 0.9% over the three months to January and by 2.9% over the past year, leaving the national average value at $684,468.

Likewise, many markets around the country saw drops in the rate of quarterly value growth in January as compared to recent months. This was particularly evident in centres like Dunedin and Wellington which have seen strong growth of late.

Only one region went against the grain and recorded particularly strong value growth: that was Hawke’s Bay. Hastings saw quarterly growth of 10.8% while Central Hawke’s Bay continues to build on a strong annual growth figure of 19.6%.

QV senior consultant Paul McCorry says affordability constraints and low supply continue to maintain modest value growth across most areas. “While the loosening of the LVRs will have enabled some new buyers to enter the market, this has been offset by a number of policy changes that have put a dampener on investor enthusiasm in the short term.”

All Quiet On The Sales Front

The price data may not offer up an easy or consistent message, but the January sales data certainly does. It shows that sales activity can best be described as subdued.

REINZ’s data has sales down nationwide with the number of properties sold during January falling by 2.5% year-on-year to 4,372. It also reveals that Auckland sales volumes decreased by -2.8% year-on-year to 1,152. These sales volumes were the lowest in two years.

‘It’s a balanced outlook [for 2019], with overall volumes set to be similar to 2018 and value growth generally continuing to be constrained’ KELVIN DAVIDSON

On top of the decline in sales, the median number of days to sell a property nationally has increased to 48, which is its highest level in nearly seven years. The number of days it takes to sell a property in Auckland is now 51, which is the highest number since February 2009.

Norwell says sales activity generally picks up after the holiday period ends. “This is something we’d expect to see again this year with no signs yet pointing to a significant, longer term decline in sales volumes.”

However, Barfoot & Thompson’s January sales data was more positive for Auckland. It has the region’s sales numbers up considerably – at 653 they were 29.6% higher than in December and 10.1% higher than at the same time last year.

Thompson says January’s sales were the highest they have been in a January for three years. “It points to vendors accepting that the market has moved in favour of buyers, and they are trimming their expectations as to the price they will accept.”

Meanwhile, the amount of housing stock on the market continues to cause concern. Both the REINZ data and Realestate.co.nz’s January data reveal low levels of stock in markets around the country. And the REINZ data has four regions (Wellington, Gisborne, Otago, Hawke’s Bay) with less than 10 weeks’ inventory available.

Auckland went against the grain somewhat in this area. Barfoot & Thompson ended January with the highest number of listings they have had at the end of January for seven years. While, according to Realestate.co.nz, Auckland’s stock increased by 12.1% on January 2018.

Balanced But Boring

So what does this slightly confused state of affairs leave commentators predicting for the market?

At the Reserve Bank’s February Monetary Policy media briefing, the bank’s Governor, Adrian Orr, made it clear they are forecasting a historically low level of house price growth around New Zealand – and negative growth in Auckland.

He says it is the Auckland component which gives them confidence that on average there will be low nominal growth nationwide. But many parts of the rest of the country will still be strongly positive on average, making it a good outlook.

Further, Orr says they don’t project an Armageddon in house prices in New Zealand because there are so many factors supporting that asset class at the moment – although investor perceptions are currently being tested.

For CoreLogic senior property economist Kelvin Davidson, the market started 2019 in the same subdued way as it ended 2018. The Auckland data is worthy of note but, in his view, jumping to any conclusions about it having entered a new weaker phase wouldn’t be advisable.

“After all, many solid foundations remain: an ongoing shortage of property, low mortgage rates which are unlikely to rise significantly in the near term, the LVRs have been relaxed, and most people are in work.”

While there are headwinds for Auckland, and the market as a whole, the prospects for 2019 haven’t changed, Davidson says. “It’s a balanced outlook, with overall volumes set to be similar to 2018 and value growth generally continuing to be constrained.”

BNZ chief economist Tony Alexander has a slightly different take on the Auckland market. He says he can run a theory that a period of downward adjustment in residential real estate activity from high levels over 2016 may have come to an end.

“That then just feeds into my central view for the Auckland market for the next three years more or less – sort of boring. But that is good for young buyers as they can peruse the market without frenzy and without get-rich-quick investors in play.”