New Zealand Property Investors' Federation, (NZPIF) is the umbrella body for 20 local Property Investors' Associations throughout New Zealand.

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10-02-2016

Auckland drops, the rest rise.

Auckland values have dropped in the last month according to the latest QV house price index. Values in areas near Auckland continue to increase strongly while further South, things are a little patchier.

Across wider Auckland, values dropped by 0.5% to $928,921 at the end of January compared to a month earlier.

The previous two months had already shown a marked slowdown from the increases we have become used to seeing in Auckland. This is therefore not a one-month anomaly, which we do see from time to time. This is a genuine drop in values.

Back in 2011 we saw a couple of months when Auckland values dropped slightly, but values at that time were almost flat so a drop wasn’t as notable. You have to go back to the beginning of the Global Financial Crises in early 2008 to see this sort of turnaround in Auckland values.

At this stage the value drops are not right across Auckland. The more central areas of North Shore, Waitakere, Auckland City and Manukau have all dropped, while Rodney, Papakura and Franklin towards the edges of Auckland are all still increasing (although the rate has slowed).

It definitely appears as if the efforts by the Government and The Reserve Bank to slow the rate of Auckland value increase are making a difference.

New property listings have been sluggish at the start of this year meaning that there is a lot less choice out there for potential buyers than back in November.

This lack of listings sits on top of a lack of physical supply of properties. The current record high levels of migration is adding far more people to the Auckland population than houses are being built for them to live in. So the shortage just keeps worsening.

Meanwhile mortgage interest rates remain extraordinarily low. We also believe that Chinese buyers, noticeably absent at the moment, will return to the market within a few months.

All these things suggest upward pressure on Auckland prices so it remains our view that Auckland values will not drop far and they won’t drop for long.

Meanwhile, values continue to increase strongly in the areas surrounding Auckland. Whangarei, Hauraki, Matamata-Piako, Waipa and Western Bay of Plenty have all increased by around 6% in just the last three months. Values have not increased that quickly in those areas since the height of the last boom in 2005-2006.

Waikato District, stretching from the southern border of Auckland to the Northern edge of Hamilton City is increasing at a staggering 9.2% in three months, although that has slowed slightly since last month. New housing developments in Pokeno and Tuakau, just over the Southern boundary of Auckland City continue to sell well, and the established towns of Huntly and Ngaruawahia further South have also increased steadily.

Tauranga values continue to increase quickly, up 8.6% over the last three months. The influence of Auckland money continues to be strong, with Auckland investors increasing their activity in recent months alongside Aucklanders moving to Tauranga. 

Interestingly, Hamilton appears to have cooled off a little bit. Back in August values were rising at over 10% per quarter, but that is now down to only 4.2%, so that rate of value increase has definitely eased. Auckland investor activity in Hamilton reached a peak in September last year and has dropped back a little since, and that may have taken at least some of the extreme heat out of the market.

Wellington values continue to accelerate upwards, the latest three months being up 4.8% in Wellington City and slightly less in Porirua and the Hutt Valley. Auckland money is less significant in the Wellington market than further north. There are definitely more Auckland buyers than a year ago but they aren’t a huge driving force in the market. First home buyers on the other hand remain keen, helped by low interest rates and access to Kiwisaver funds.

Market activity stayed strong over Christmas and New Year, but the number of new listings coming onto the market stayed at similar levels to last year. As a result the total number of properties for sale in Wellington has dropped significantly from November and is well below the same time last year. This low supply coupled with high demand is driving up values.

In Christchurch, values for the past year have been increasing at a fairly modest 3% year on year. This has however picked up just a little over the past few months to around 1.7% every three months. So a slight increase but nothing like further North.

In Dunedin things have also picked up a little to be increasing around 6% year on year, up from 1% a few months ago.

Queenstown Lakes has accelerated considerably from mid last year and values are now rising at over 5% per quarter. Not only are Auckland buyers almost undetectable in the Queenstown market, but they have also not increased. The buyer group showing the greatest increase in activity is first home buyers. What we can’t tell is whether they are traditional young kiwi first home buyers or offshore buyers new to our market.

In many provincial and rural areas there are signs of values increasing in the past few months. However in those smaller centres, the index is more volatile due to the smaller number of sales used to calculate it. It’s therefore a little early to call the increases ‘real’.

We are still only just emerging from the holiday season, so the market is not yet back into full swing. We will need another month to establish what the 2016 trends really are, but at this stage it looks to be a continuation of how we finished 2015.

I think we are in for a fascinating year, and you can be sure there are some twists and turns still to come.

Regional maps can be found here

Tags: house price inflation

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