Winter chill hits New Zealand property market

Wednesday, 6 June 2018

Dunedin was the only main centre with any material value growth in the month, up 1.1 per cent.

New Zealand's property market has flattened and is likely to stay that way for at least the rest of the year, valuation data provider QV says.

Nationwide, the QV House Price Index dropped 0.1 per cent in May. Dunedin was the only main centre with any material value growth in the month, up 1.1 per cent.

Its 4 per cent growth in the quarter was four times the value growth of any of the other main centres.

Even Wellington, which has had a strong run of price rises, experienced a drop of 1.3 per cent in May, attributable to weakness in Wellington City and less demand for higher-priced properties.

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Tauranga also reported a 0.9 per cent price drop over the last three months. Auckland and Christchurch's markets had no real change over the quarter.

Tauranga saw a 0.9 per cent price drop over the last three months.

CoreLogic head of research Nick Goodall said there was more growth in many small, regional markets but even that looked to be subsiding.

'The value growth witnessed in these centres over the last few years were unlikely to be sustained with local economies struggling to keep up with demand.

'While first-home buyer activity has been strong in many of these centres recently, unaffordability may now be starting to bite here, too.'

Whanganui was one regional city that had further growth in May. Its quarterly price growth hit 5 per cent, the strongest rate in a year.

'Investors in particular remain an active presence, perhaps taking advantage of the lower average value of properties here [$249,000] However this can sometimes be cause for concern, as investors chase capital gains, and may not account for the increased cost of lower valued properties and/or areas, such as higher maintenance and increased risk of vacancy,' Goodall said.

He said Dunedin's surge in prices was likely to slow as the downward pressure of reduced immigration, less availability of credit and a tighter investment market took its toll.

'We've seen Wellington drop away as well as Christchurch and Auckland which were already flat, the flattening is more consistent now.'

He said demand for houses would be reduced by the Healthy Homes Guarantee scheme imposing more requirements on landlords, more focus on dampening speculation in the market and ring-fencing of property investors' losses.

'All these things keep a lid on demand.'

He said, for owner-occupiers, it could be a good opportunity to purchase a property. 'If you can afford it, it could be a nice time to buy, there's potentially less competition.'

Goodall said the Reserve Bank was wary of a resurgence in house prices given New Zealand's high household debt levels. 'Their decision to leave the loan-to-value restrictions unchanged for now illustrates their caution of the market and the reliance on banks maintaining prudent mortgage lending standards.'