Auckland led house prices up in the current boom – but experts are divided on whether it will lead them down again.
Until 2015, Auckland prices shot ahead while the rest of the country advanced more slowly. But now Real Estate Institute figures show Auckland’s median price is up just 2.5 per cent, year-on-year, while the rest of the country has advanced 11.4 per cent. Auckland prices dropped 0.8 per cent between May and June. In July 2015, Auckland house prices were increasing at a rate of 27.1 per cent. But Institute chief executive Bindi Norwell said most other regions had double-digit growth. There were record median prices in Bay of Plenty, at $555,000, Manawatu/Wanganui, at $280,000 and Tasman, $581,000. She said it was normal for the regions to lag behind Auckland on the “growth curve”. Other areas took off later and may take longer to slow.
Sales volumes across the country have continued to decline – in Auckland they are down 33.2 per cent for the year to June and nationally they are down 24.7 per cent for the same period. “We know that it’s winter and the election is just two months away now which typically impacts the number of properties sold in the market. The number of properties sold across the country is the lowest we’ve seen in the month of June for three years now – particularly in the $500,000-and-under property price bracket,” Norwell said. “This slow-down in transactional activity, but stabilising price trend highlights the underlying dynamics between housing demand and housing supply, with population growth continuing to rise faster than building consents and dwelling supply.” She said loan-to-value restrictions, which limit the amount of lending banks can do to owner-occupiers with less than 20 per cent deposit, and investors under 40 per cent, had made a significant difference. “The major trading banks are being more cautious with their approach to lending particularly their view of how highly leveraged Kiwis are when it comes to properties.” But she said talk of falling prices could be premature. Even in Auckland, they only looked steady, she said.
“The data also shows an emerging trend of section sales in Auckland occurring more quickly than dwelling sales, highlighting that demand for sections is still rising in Auckland while demand for dwellings is easing.” Infometrics chief forecaster Gareth Kiernan said whether other regions followed Auckland’s slowdown would depend on several factors. He said a significant drop-off in population growth combined with an economic downturn could slow the housing market across the country. But Auckland was more susceptible to the impact of interest rate rises, because of the house prices there. If interest rates rose higher or sooner than expected, prices in the rest of the country could hold up better than Auckland’s, he said. But on the flipside, Auckland still had a significant undersupply of housing, which limits the extent to which house prices can fall. Other regions do not have this supporting factor.
Analyst Rodney Dickens said some parts of the country were still in catch-up mode and would be for some time. He said it was to be expected that the parts of the country that performed most strongly in one boom tended to underperform in the next boom. Dickens said, when prices next tool off, Auckland might have less room to increase because houses there would already be relatively expensive.
Meanwhile, Trade Me data shows that the average asking price of the typical New Zealand property dropped 1.2 per cent in June to $632,850 – and that drops seems to be more widespread. But Nigel Jeffries, head of Trade Me Property, said homeowners had no reason to panic. “The average asking price is still up 7.1 per cent on this time last year, but the rate of increase is down from 12 per cent at the start of the year. “It means the significant capital gains of recent years are slowing down but if you’re looking to buy it will be welcome news that the deposit you require isn’t surging at the insane rates we’ve been seeing.” In Auckland, the average asking price dipped for the second month in a row, down 0.9 per cent in June to $911,000, the same level as in November 2016. Even the regions, which have been very strong over the last year, slipped back in June. But Jeffries said that behind the national figures several regions continued to perform strongly. “The ‘halo’ regions are still powering on as the Auckland effect continues to ripple out, and Otago has emerged as a powerhouse with the average asking price jumping 50 per cent in the last five years.”
Source – Stuff