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04 Jul 2014

Property Values Up in June Quarter

New Zealand property values continue to rise, despite cooling conditions in parts of Auckland and a slowdown in growth on an annual basis.  According to state valuer Quotable Value (QV), property values increased 2.1 percent in the three months ended June, a significant lift from the 0.7 percent growth recorded in May. While growth is mixed across the country, strong June figures suggest solid support underpinning the New Zealand property market. 

According to QV, the average New Zealand property is now worth $476,246, a figure which rose 2.1 percent from $471,791 in May.  In Auckland, the average value is now $718,285, up 2.7 percent over the quarter.  Values were also up 2.5 percent in Christchurch City and 1.1 percent in Hamilton City.  However, property values have decreased by 0.4 percent in Wellington over the last three months, with Dunedin and a number of provincial centres also recording negative growth.

Property growth is not so healthy when viewed on an annual basis, however, where values continue to slide.  While property prices are still 15 percent above the previous market peak of late 2007, the 8 percent growth recorded in June was down from 8.2 percent in May as house price inflation continues to ease.  The Auckland market increased by 12.3 percent year-on-year, with values up 31.4 percent since 2007.  Despite solid growth throughout much of the city, however, prices in some Auckland areas are also easing.  

According to Auckland valuer Bruce Wiggins, hot areas of Auckland are cooling faster than the rest of the market:  "We are seeing a gradual reduction in the rate of growth in property values in some areas and more sellers opting to put on an asking price or sell by negotiation. The gradual reduction in growth is particularly noticeable in 'hot spots' such as Waitakere, which was up more than 17 per cent year on year a few months ago and is now showing a 15.2 per cent increase year on year and Papakura, where values are also flattening off."

A number of factors are contributing to the market slowdown, with house price inflation peaking in November last year as the market adjusts to higher interest rates and tighter lending restrictions.  According to ASB economist Christina Leung, property growth has been losing strength since the beginning of the year and may ease to 6 percent by the end of 2014.  "But given the fact that there are still housing shortages in the markets, particularly in Auckland and Canterbury, that will maintain upwards pressure on prices." said Leung.

Strong June growth figures are the result of upward pressure, as the New Zealand market continues to be affected by a lack of stock in some areas and a lull in new property listings.  The Reserve Bank has also come out saying population growth could put further pressure on the housing market, which would have a direct effect on house price inflation and may lead to further interest rate hikes.  While house price inflation is likely to continue easing throughout the year, stronger growth than expected in June points towards a shallow market correction.