Softness in NZ property market seen set to continue

Thursday, 15 February 2018

Parts of the country are suffering sharp house price falls of more than 10 per cent, and commentators say the downturn could spread.

The Real Estate Institute has released its latest data, for January.

It reveals the number of properties sold across the country was up 2.7 per cent compared to January 2017.

But compared to December, national house prices dropped 5.5 per cent to a median $520,000. In Auckland, prices were down 4.8 per cent month-on-month and 1.2 per cent on the year before.

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Real Estate Institute chief executive Bindi Norwell said much of the Auckland drop was due to price falls in Manukau City, down 10.2 per cent, Rodney, down 4.3 per cent and Waitakere City, down 2.8 per cent.

'Manukau City's median price is the lowest since January 2016, Rodney's is the lowest median price since September 2017 and Waitakere's is the lowest since March 2016, so you can see why this has pulled the overall Auckland median down.'

On an annual basis, national house price growth was 7.1 per cent.

Otago and Hawke's Bay had record median prices.

But Hilary Parker, of Infometrics, said the softness in the market was likely to continue over the next year - and spread.

'Affordability constraints in other parts of the country will also drag on national sale volumes. And we expect prices across the regions to gradually follow Auckland's decline.'

The median number of days it took a property to sell was 46 nationally, five days longer than the same month last year.

Nationally, this is the highest number of median days to sell recorded since February 2012, and is well above the national low of 30.8 days in mid-2016.

The biggest increases were on the West Coast, where the time to sell increased by 87 days to 158, Taranaki, up 16 days to 56 and Gisborne, up 13 days to 43.

The only region with a decrease in the number of days to sell year-on-year was Northland – down three days to 45.

Norwell said the increase in turnover in January was positive. In Nelson, almost 28 per cent more properties sold compared to the year before.

'January can often be a quiet month for the industry as people spend much of their time at the beach or the bach. However, clearly the warmer weather has helped sales, as it's the first time we've seen a positive year-on-year sales increase in 19 months.

'There were some really positive figures from around the country, with 11 out of 16 regions experiencing an increase in sales when compared to the same time last year. Additionally, Gisborne saw the highest number of properties sold in the month of January since January 2007.'

ASB economist Kim Mundy said the statistics showed a reversal of activity seen in recent months.

'House sales fell in January after three consecutive monthly increases into the end of 2018. Seasonally-adjusted sales fell 2.5 per cent month-on-month in New Zealand, driven by falls in 11 out of 16 regions.  For example, on a seasonally-adjusted basis Wellington sales fell 11 per cent, Auckland sales were down 6.2 per cent and Otago sales activity fell 7.5 per cent.'

ANZ chief economist Sharon Zollner said the market was unlikely to take off any time soon due to people not being able to afford the prices being asked, credit headwinds, and new Government policies.

'In short, housing market activity is well off its lows, suggesting house price inflation has likely also found a floor, but the market remains much cooler than it has been.'

The REINZ House Price Index saw annual growth fall to 3.4 per cent in January from 3.7 per cent in December.