The New Zealand property market is at a turning point, with limited short-term growth failing to change long-term forecasts. Despite a short-term bounce in both prices and sales figures during February, the market remains at the early stages of an expected slowdown in property values. While low levels of construction activity and high migration numbers will put pressure on housing for some time to come, some commentators are suggesting the emergence of a buyers' market.
According to the latest data from the Real Estate Institute of New Zealand (REINZ), the median national property price increased by 0.8 percent over the month to $530,000 in February. When analysed on an annual basis, prices were up 7.1 percent compared to February 2017. Median prices increased in 14 out of 16 regions, with Auckland prices even managing to rise slightly despite the talk of a market slowdown. Once seasonally adjusted, Auckland prices went up by 3.0 percent on January figures and 3.9 percent on an annual basis to $858,000. Sales volumes also increased slightly in February, with a 1.2 percent increase on January and a 1.6 percent increase over the year.
According to Quotable Value (QV), the average value of homes in New Zealand was $672,645 in February, up by 0.16 percent compared to January and 6.5 percent compared to February last year. QV and REINZ prices differ in two main ways: QV measure changes in the entire stock value of an area while REINZ measure the value of properties sold in a given time period, and QV prices include both private and agent sales in a rolling three month calculation while REINZ prices are based on agent sales alone in a single month.
Despite the recent bounce, the long-term slowdown in property values expected this year may have already started according to CoreLogic's NZ's head of research Nick Goodall: "As with anything, the devil is in the detail and in a changing market with weakening sales volumes, the power can start to shift to buyers as they become less anxious about getting onto the ladder and realise that waiting for the right property can pay off as savings climb faster than house values."
QV Auckland senior consultant James Steele agrees, saying "The market [in Auckland] remains sluggish with values holding for the most part, with a lack of good quality listings on the market and lower than normal sales volumes for this time of year... Properties that are not well presented, have outstanding maintenance or are damp or shaded for example, are sitting on the market for longer... This is a change from when the market was very hot and everything was selling quickly."
Any slowdown in New Zealand is likely to be limited, however, with market fundamentals still strong due to the ongoing imbalance between supply and demand.
"New Zealand's construction industry faces a major challenge in creating enough affordable stock at the speed required to keep up with our continually strong population growth... Net migration hasn't slowed much recently, with figures remaining near all-time highs... And of course the kicker is our still low interest rates." said Mr Steele, adding "While banks have tightened their lending standards, low interest rates means borrowing higher sums to secure a desirable property is possible. All these things will continue to keep a stable foundation for property values."
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