PROPERTY VALUES BEGIN TO STABILISE
New Zealand property values are beginning to stabilise according to the QV residential property indices for November.
This time last year values were steadily increasing from a low in early 2009. This increase continued until March 2010, then values began to gradually decline. As a result the gap between values this year and last year has closed further to 0.3 percent. The rate of decline has slowed in recent months and it appears as if values are beginning to stabilise. Values are now 5.6 percent below the market peak of late 2007.
“There continues to be a relatively low number of house sales, as has been the case for most of the year. Securing funding from banks remains difficult for some potential buyers, while others are taking their time over purchase decisions” said QV.co.nz Research Director, Jonno Ingerson.
“Not all parts of the market remain slow moving however, with QV Valuers in the main centres still seeing quality properties in established and traditional areas selling quickly and for good prices. This is in contrast to the large number of properties that have now sat unsold for several months” said Mr Ingerson.
“There has been an increase in the number of properties put on the market over the last few months, as is typical of this time of year. However with the low level of sales activity, this is increasing the stock of unsold property. We now expect that many buyers will delay any purchase decisions until the New Year” said Mr Ingerson.
While unrelated to the QV index, and a less reliable measure of value change, the average New Zealand sales price over the last three months has dropped to $397,805 from the $399,055 reported last month.
There are signs that nationwide values are beginning to stabilise, with the strongest signs of this in the Auckland region where values have now been stable for several months. Compared to the same time last year, values are now 1.8 percent higher, but most of this increase occurred between November 2009 and March this year. After falling slightly for a couple of months, values have been more or less stable since June.
Values in Hamilton and Tauranga have also stabilised in the last couple of months after slightly declining for most of the year. Hamilton is now 1.6 percent below the same time last year, and Tauranga 0.9 percent below.
Compared to the other main centres, values in the Wellington area have dropped the most since March this year. Values are now 1.6 percent below the same time last year although in the last month there are the first signs that values in Wellington are also stabilising.
The property market in Canterbury is now beginning to recover well after some initial disruption following the September 4th earthquake. According to information in reports published by the Earthquake Commission less than 5% of the properties in Canterbury suffered major land damage. Since the earthquake there have been very few sales of houses in badly damaged areas, but properties with little or no damage are now beginning to attract good interest. The sales process is still taking longer than usual as buyers, banks, and insurance companies complete thorough checks on the properties before completing the sale.
The significant slowdown in the number of sales, and the delays in the overall sales process in Christchurch following the earthquake mean that the QV residential price index cannot yet be used to measure the change in property values after the earthquake. Preliminary results show that property values have bounced back after the earthquake with October 3.2% higher than the pre-earthquake trend.
Values in Dunedin have continued to be variable in recent months, but in general have been in gradual decline all year and are now 1.2 percent below the same time last year.
Values remain above the same time last year in Wanganui (1.3 percent) and Nelson (1.9). Values are similar to last year in Rotorua (0.9), Hastings (0.6), Napier (0.9), New Plymouth (-0.6) and Queenstown Lakes (0.9). Values are below last year in Whangarei (-2.1 percent), Gisborne (-5.1), Palmerston North (-1.3) and Invercargill ( 1.7).
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QV’s Residential Price Index for November shows that property values in the Auckland region have levelled out in the past few months, although have dropped by 1.0% since March this year. In contrast, values increased by 2.9% in the 4 months to March.
Consequently, values now sit 1.8% above the same time last year, but 2.7% below the market peak of late 2007 as the graph below illustrates:
Glenda Whitehead of QV Valuations said; “Our registered valuers working in the field sense that values in the Auckland region have levelled, reflecting the stability in our statistics over the past few months. At present, this stability in values isn’t lifting activity, which remains uncharacteristically muted for this time of year. The recently reported boost in listings should however provide purchasers with a wider potential pool from which to purchase, which could lead to more turn-over”.
“We are currently valuing a number of properties in mid-to-upper price ranges, with owners upgrading, renovating and taking on larger building projects. This reinforces the trend that many homeowners are just content to stay put, focussing on improving their current circumstances, rather than moving altogether. Also worth noting is the number of first home buyers who are taking advantage of the Housing New Zealand Welcome Home Loan initiative, supported by some of the major banks. With low interest rates and more stock on the market from which to choose, some renters are being enticed into the market, as the buy versus rent equation tips more in favour of buying” Ms. Whitehead said.
“A number of our clients have indicated that they may consider listing in the New Year. However, we sense a lack of commitment to the selling process at this stage, with the wait-and-see attitude persevering. We also continue to hear reports of vendors with unrealistic expectations given the quality or position of their homes. On the other hand, high-quality properties are still attracting good interest and healthy sales prices. We have recently heard of investors on the North Shore looking to sell, with some doing so privately, perhaps to reduce their costs” Ms. Whitehead said.
“With values now undoubtedly much more stable than early this year, we may see confidence grow and as the months move on, more buying and selling activity. Although, with most people winding down for Christmas now, we don’t expect much to happen in this space until next year” Ms. Whitehead said.
QV’s Residential Price Index is calculated using sales data from the 3 months leading up to the month being reported. It is not the same as the average sales price, which fluctuates in line with the mix of properties selling in upper or lower price brackets. The average sales price for the Auckland region in November was $526,659.