Residential Property Market Growing at 10.5%

Media release
8 September 2006

Embargoed to 11.59pm Sunday, 10 September 2006

Residential Property Market Growing at 10.5%

QV’s residential property statistics released today show a 10.5% growth in national property values in the past year (calculated over the three months ending August 2006 in comparison to the same period last year). The growth rate dropped from 11.1% reported in July. Over this period, the New Zealand average sale price was $340,473.

There were differing trends across the main urban areas, with the Auckland City growth rate stable at 7.6% (7.5% in July), and Dunedin growing at 6.2% (up from the 5.8% reported in July). However, the other main centres all saw growth rates slow with Hamilton at 16.2% (down from 17.5%), Wellington City 9.5% (down from 9.9%), and Christchurch growing 9.4% (down from 10.4%).

“Across the country, there is a gradual easing in the property market. Prices and hence property values are still higher year on year, with no signs of any dramatic falls, but conversely the demand that was pushing values up faster and faster over the past 3 years has definitely eased back”, said QV spokesperson Glenda Whitehead.

Signs of slowing rates of property growth were also reported in provincial cities: Gisborne 18.2%, Palmerston North 15.8%, Invercargill 11.2%, Napier 6.2%, and Nelson 2.4%.

“With 24.9% annual growth, Rotorua is the only provincial centre to still be growing at in excess of 20%. It was a late starter in this cycle and still in catch-up mode. Several other smaller centres are also growing at rates over 20%. These all tend to be in lower value localities” said Glenda Whitehead.

ENDS

Main Urban Areas Commentary:

Auckland:

Property values in Auckland City have grown by 7.6% and on the North Shore by 7.7% (calculated over the three months ending August 2006 in comparison to the same period last year), similar to the rates reported in July. The average sale price in Auckland City was $526,283 and $517,566 in North Shore.

Most areas in the wider Auckland market reported slowdowns in property growth rates: Manukau 11.7% (down from 12.4%) and Waitakere 7.8% (down from 8.6%). Papakura’s property values dropped from 13.1% to 11.2%, while Franklin’s growth rate declined from 16.9% to 14%. “Papakura and Franklin have shown the biggest easing in recent months, and are now pulling more into line with their neighbours, perhaps reflecting their later upward start and lower overall value levels at that time” said Glenda Whitehead of QV Valuations

“Those active in the market are now generally faced with the same dilemmas, higher interest rates than in the recent short term, a static rental market in the suburbs and soft inner city rental market, and general affordability factors. These sobering thoughts, together with a long bleak winter, have definitely put the dampers on the wider Auckland market over recent months. However, people remain optimistic about the long term returns available from the residential property market, but are making cautious decisions about the short term” said Glenda Whitehead of QV Valuations.

Hamilton:

Hamilton residential property grew in value by 16.2% over the 12 months to August 2006, down slightly from 17.5% reported to July.

“The easing in the market is most likely a combination of seasonal and prevailing economic conditions. Sales volume and activity are expected to increase as we enter spring, as is normally the case” said Richard Allen of QV Valuations.

“The average sales price for Hamilton City continued to hover around the $315,000 mark” said Mr Allen.

“Most parts of the city continued to show a slowdown in growth as has been the trend over the last few months, the exception was South East Hamilton which exhibited some resilience and remained stable with annual growth of 16.8%” .

Wellington:

Wellington City’s property values grew by 9.5% over the past year, down slightly from 9.9% reported in the period ending July. The average sale price in Wellington City was $440,455.

“The Wellington market has eased back to more normal levels. Partly this is due to winter conditions, but there are signs of more buyer discretion and properties taking longer to sell for unusual or unique properties, or where the seller has price expectations that may be too high” said Max Meyers of QV Valuations.

Christchurch:

In Christchurch, property values increased by 9.4% for the year to August 2006, down from the 10.4% growth in July. The city’s average sale price was $329,534. “This gradual decline in year on year growth has now been occurring for the past seven months and ties in with a steadying of the average price achieved for properties” said Mark Dow of QV Valuations.

QV's statistics show a good volume of sales above $400,000 in Christchurch. “There were also seven sales of properties in excess of two million dollars, which is high for the Christchurch market” Mark Dow of QV Valuations remarked.

Commenting on the sale volume trend in Christchurch, Mr Dow said “the trend of declining sales volumes continues for the year on year comparisons, but this appears to be flattening in recent months”.

Dunedin:

Dunedin residential property values have grown 6.2% (calculated over the three months ending August 2006 in comparison to the same period last year), up slightly from the 5.8% increase reported for the period ending July 2006. The average sale price in Dunedin was $246,605.

“The latest figures for Dunedin City continue the trend of the last few months showing a gradual easing in the residential market. Despite the increasing interest rates and inflationary pressures on the family budget, the QV Residential Price Movement Report is still showing positive growth. There is still an expectation that we will have a period of little or possibly even no growth once higher interest rates impact on those coming off two year fixed rates later this year and early next year” said David Paterson of QV Valuations.

QV RESIDENTIAL PRICE MOVEMENT REPORT - as at August 2006

City / Region / August 2006 Property Value Growth % (Annual % Change) / July 2006 Property Value Growth % (Annual % Change) / August 2006 Average sale price

Far North 19.3 18.2 $301,291
Whangarei 17.5 20.9 $304,786
Kaipara 28.5 26.1 $255,591
Rodney 7.1 8.1 $442,935
- Hibiscus Coast 6.3 6.2 $456,725
- Rodney (North) 8.3 11.6 $421,623
North Shore City (A) # 7.7 7.7 $517,566
- Coastal North Shore 7.6 7.3 $586,750
- North Shore Onewa 6.3 6.4 $423,940
- North Harbour 6.6 6.6 $529,121
Waitakere City (A) # 7.8 8.6 $361,074
Auckland City (A) # 7.6 7.5 $526,283
- Auckland City (Central) 1.6 1.9 $455,876
- Auckland City (East) 8.8 6.9 $690,745
- Auckland City (South) 8.5 9 $453,994
- Islands 14.3 16.4 $503,520
Manukau City (A) # 11.7 12.4 $372,729
- Manukau East 9.7 10.5 $481,278
- Manukau Central 12.9 13.1 $308,108
- Manukau North West 14.2 14.9 $325,907
Papakura (A) # 11.2 13.1 $320,770
Franklin 14 16.9 $325,310
Thames Coromandel 7.2 4.7 $435,214
Hauraki 20.6 18.9 $247,600
Waikato 14.4 15.6 $235,568
Matamata Piako 12.6 14.2 $257,688
Hamilton # 16.2 17.5 $315,891
- Hamilton North East 14 15.3 $402,935
- Central City/North West 16.4 18 $299,499
- Hamilton South East 17.8 17 $287,006
- Hamilton South West 17.3 18.8 $278,125
Waipa 21 22.9 $290,838
Otorohanga 45.2 42.8 $194,208
South Waikato 20.9 25.6 $114,389
Waitomo 24 33.4 $142,909
Taupo 6.6 N/A $340,468
Western Bay of Plenty 16.3 17.5 $384,874
Tauranga # 2 3 $386,770
Rotorua 24.9 26.4 $234,977
Whakatane 3.2 11.9 $286,800
Kawerau 11.2 13.4 $125,984
Opotiki 23.6 12.9 $160,482
Gisborne 18.2 21.5 $245,763
Wairoa 13.5 8.1 $88,352
Hastings 6.4 7.6 $268,687
Napier City # 6.2 7.5 $335,802
Central Hawkes Bay 19.4 20.5 $183,314
New Plymouth 6.7 8.3 $288,925
Stratford 22.6 23 $182,618
South Taranaki 17.4 16.2 $172,909
Ruapehu 33.9 43.1 $156,130
Wanganui 15.1 15 $183,497
Rangitikei 25.7 27.9 $146,448
Manawatu 17.4 15.7 $204,229
Palmerston North # 15.8 16.7 $257,746
Tararua 25.5 26.2 $128,871
Horowhenua 22.8 21.6 $184,509
Kapiti Coast 15.4 14.6 $301,230
Porirua (W) # 14.2 11.4 $333,372
Upper Hutt (W) # 14.2 18.7 $288,802
Lower Hutt (W) # 15.5 16.4 $316,994
Wellington City (W) # 9.5 9.9 $440,455
- Wellington City & Southern 7.6 8 $447,617
- Eastern Suburbs 8.4 8 $483,503
- North Wellington 12.9 13.4 $399,638
- Western Suburbs 9.5 9.6 $490,136
Masterton 18.3 19.6 $206,629
Carterton 20.5 19.9 $205,234
South Wairarapa 22.3 13.8 $244,261
Tasman 7.1 8.7 $326,895
Nelson # 2.4 3.1 $347,968
Marlborough 6.7 11.4 $297,395
Kaikoura -1.9 5 $371,818
Buller 9.2 20.2 $157,363
Grey 17.2 19.1 $174,851
Westland 32.1 29.5 $205,869
Hurunui 14.4 13.1 $255,846
Waimakariri 9 9.6 $296,275
Christchurch City # 9.4 10.4 $329,534
- East 10.3 10.5 $268,335
- Hills 9 10.5 $496,621
- Central City and North 7.7 10 $380,902
- Southwest 10.8 10.7 $298,790
Banks Peninsula 19.1 22 $368,037
Selwyn 17.5 14.2 $320,830
Ashburton 17.2 18.1 $225,718
Timaru 13.2 13.1 $213,530
MacKenzie -5.5 11.9 $254,500
Waimate 6.8 19.2 $126,054
Waitaki 9.3 8.6 $174,645
Central Otago 8.3 6.8 $270,998
Queenstown Lakes 5.1 4.9 $531,182
Dunedin # 6.2 5.8 $246,605
- Central/Northern City 4.7 2.4 $247,081
- Peninsular/Coastal Dunedin 5.7 7.8 $207,052
- Southern City 7.9 7.5 $236,514
- Taieri 5.9 8.5 $274,264
Clutha 22.6 25.0 $124,163
Southland 9.5 4.6 $142,668
Gore 9.8 11.5 $118,544
Invercargill # 11.2 12.2 $145,760

Total NZ 10.5 11.1 $340,473

Auckland Region (A) 8.6 8.9 $444,697
Wellington Region (W) 11.8 12.3 $376,550
Main Urban Areas # 9.6 10.1 $379,927

Notes on the above data:

If a City or Region is shown in italics with an * this indicates the values for this area may not be statistically accurate as they are based on a low volume of sales.
N/A - indicates that either there were too few sales to report a Property Value Growth % or that the data for this period was unavailable

The information included in the above table is calculated based on the sales data entered into QV's system for the previous 3 month period. For example, information for the period ending June will be calculated based on sales entered between April 1 and June 30.

Property Value Growth is the annual % change in residential property values, calculated using QV's House Price Index methodology. The residential sales entered into QV's system for the previous 3 month period are compared to the same period of the previous year to identify the annual percentage change in residential property values. Average sale prices are calculated based on residential sales entered into QV's system for the previous 3 month period.

Residential Price Movement
Questions and Answers:
The following information is provided as background to the Residential Price Movement statistics.

1. What is the Residential Price Movement Report?

The Residential Price Movement Report is a new set of residential property statistics that provides an estimate of the change in residential property values over the previous 12 months for areas throughout New Zealand. Residential sales compiled by QV for the previous 3 months are compared to the same period of the previous year to identify the annual percentage change in residential property values. The residential sales included are for residential houses, apartments, flats, home and income properties, and houses converted to flats.

2. Why has the Residential Price Movement Report been developed?

The Residential Price Movement Report has been developed to provide a timely indicator of residential property value movement, using the latest residential sales data compiled by QV for the previous 3 month period.

QV has previously only released property statistics quarterly. QV’s measure of price movement has been the Quarterly House Price Index (QHPI). The QHPI only includes sales that have been notified to the Territorial Authority that sold within the quarter. As sales of properties can sometimes take 4-6 weeks to settle, the QHPI is released after an extended period to incorporate as much sales activity from the quarter, which results in increased statistical accuracy, but also a less timely output.

As the Residential Price Movement Report uses the sales compiled by QV over a 3 month period, rather than the sales that necessarily sold within that period, the Residential Price Movement Report can be released on a more frequent basis, providing a timelier indicator of property value movement. The Residential Price Movement Report also includes sales activity in other residential property sectors including apartments and flats.

3. How frequently will the Residential Price Movement Report be released?

The Residential Price Movement Report data will be available to the media on a monthly basis. It will be released to the media for publication on either the second or third Monday of each month.

4. How current is the Residential Price Movement data?

The data contained in the Residential Price Movement Report is based on the residential sales compiled by QV for the previous 3 month period.

For example, the Residential Price Movement Report as at January 2005 will include sales compiled by QV up until 31 January 2005 and include sales compiled since 1 November 2004.

5. Why does the Residential Price Movement Report include sales compiled by QV over a 3 month period?

Sales are included over a 3 month period rather than a single month to ensure that there are sufficient sales volumes to calculate statistically accurate property value growth.

6. How is the Residential Price Movement data calculated?

The Residential Price Movement Report includes two indicators of property value; the property value growth, and average sales prices.

Property Value Growth
The Property Value Growth uses QV’s House Price Index methodology, which generates a residential index for each area by recognising the sales price of each property sold compared to its capital value. This ensures the index provides a measure of change in property values, without fluctuations caused by higher sales volumes in one or more property sectors (e.g. high volumes of apartment sales or investment properties).

Residential sales compiled by QV for the previous 3 month period are compared to the sales compiled by QV for the same period the previous year to identify the annual percentage change in property values.

Average Sales Prices
The Average Sales Prices calculated in the Residential Price Movement Report are based on residential sales compiled by QV for the previous 3 month period.

7. Does property value growth reflect a change in average sales prices?

No. Property Value Growth does not reflect a change in average sales prices, which are only given to enable a comparison of sale prices for one month compared to the last. Property Value Growth uses QV’s House Price Index methodology to generate a residential index for each area by recognising the sales price of each property sold compared to its capital value.

8. Why does QV recommend using the Property Value Growth rather than Average Sales Prices to verify the change in property values over time?

Average Sales Prices are only provided in the Residential Price Movement Report as a broad indicator of property values in an area to assist comparisons between areas. QV recommends referring to the property value growth to verify change in property values over time, rather than the average sales price, as the average sales prices can be impacted by the types and categories of properties selling, or low volumes of property sales.

9. When was the Residential Price Movement Report first released?

The Residential Price Movement Report was first released for the period ending January 31 2005. The QV Quarterly House Price Index, which measures the movement of house values over time, is available back until 1989. QV is also able to produce statistics using its database going back to 1985 for most areas.

10. Why does the Residential Price Movement Report provide an ‘estimate of property value’ only?

Data in the Residential Price Movement Report provides estimates only of property value, and should not be considered ‘final’ statistics, as not all sales for the 3 month period will be included due to the time the data is released. This is because some sales within the 3 month period will not have been notified to the Territorial Authority in time for inclusion in the Residential Price Movement Report data. Notification of the sale to the Territorial Authority does not occur until after the sale has been settled and documents forwarded by the solicitor. This generally introduces a lag of 4 to 6 weeks before the Territorial Authority records the sale.

QV produces final property statistics which are released after an extended period to incorporate a greater level of sales activity, resulting in a more statistically accurate output. Final property statistics, including the QV Quarterly House Price Index, can be purchased online at www.qv.co.nz.

11. Why do some Territorial Authorities show ‘N/A’ (Not Available)?

Territorial authorities may show ‘N/A’ if there is insufficient data available at the time of publication to produce statistically accurate outputs. This may occur when there has been very low sales activity in an area, or alternatively when QV has not been supplied sufficient residential sales volumes by a Territorial Authority for a particular period.

12. Why does QV caution against using statistics with low volumes of sales?

Statistics based on low sales volumes should be used with caution, as low volumes of sales are insufficient to create statistically accurate outputs. Any statistics calculated based on sales volumes of less than 50 sales appear in Italics in the Residential Price Movement Report data.

13. How are the regions and city areas defined?

Property Value Growth statistics are provided for each council area throughout New Zealand. Five main urban areas (Auckland, Hamilton, Wellington, Christchurch, and Dunedin) also have property value growth statistics available for areas within the cities. These city areas have been defined through consultation with QV Valuers that have local knowledge of each area.

Property Value Growth Statistics are not provided for individual suburbs, as most suburbs have insufficient sales volumes to ensure statistically accurate property value growth calculations.

14. Where does QV source the property data?

QV maintains a national database on Property Information that it creates by sourcing updates of the District Valuation Roll from all NZ Territorial Local Authorities/councils.

ENDS

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