Further Signs That Property Market May Be Easing

Further signs that property market may be easing

QV's September statistics report a 13.2% growth in national property values over the past year (calculated over the three months ending September 2007 in comparison to the same period last year). The growth rate eased from 13.3% reported in August. The average sale price for New Zealand residential properties increased to $404,089.

"We may be seeing the first signs that the rate of increase in property values is flattening" said QV spokesperson Blue Hancock. "Residential sales volumes have been easing for several months and that trend can only continue for so long before it starts to impact prices".

"2007 has seen the value of NZ properties increase at a higher and higher rate, but our September figures show a marginal drop. Although it's only a very minor slowdown, this is the first time since January 2007 that our statistics have shown the rate of growth in values to be slowing" said Mr Hancock.

Of the main urban centres, Wellington property values grew 14.1% (down from 14.5% reported last month) and Christchurch dropped to 13.1% from 14.1%. Auckland City held steady at 12.1% (12% last month) and Hamilton and Dunedin increased to 14.4% and 10.4%, respectively.

In the provincial centres, growth in property values in Invercargill increased marginally to 34.6% with Gisborne easing from 25.3% last month to 21.8% this month. Taupo slowed to 3.1%, Palmerston North to 13.7%, Nelson to 13.1%, and growth in Queenstown property values slowed from 11.6% to 10.8%.

ENDS

ADDITIONAL INFO:

Main Urban Areas Commentary:

Auckland:
Property values in the Auckland region increased by 13.3% over the past year (calculated over the three months ending September 2007 in comparison to the same period last year). The average sale price for the region was $512,964.

"The Auckland region continues to see a trend of steady growth in property values. Annual growth rates in all the main urban centres were up slightly from last month with the exception of Rodney where growth eased to 14%" said Glenda Whitehead of QV Valuations.

"Reports from our valuers across the Auckland region have been consistent with feedback that the number of listings has increased since winter but not significantly. There are buyers out there, but not in abundance, and they are acting cautiously" said Whitehead.

"Auckland City's 'year on year' growth was steady at 12.1%. Growth figures were flat across the majority of areas, with some increases in the eastern part of the city. Conversely the average sale price for the city decreased slightly this month to $593,772 from $594,876 reported last month" said Whitehead.

Hamilton:
Hamilton's property values increased by 14.4% over the past year (calculated over the three months ending September 2007 in comparison to the same period last year). The average sale price for the city was $365,515.

Residential property value growth in Hamilton increased moderately in September to 14.4% from 14.1% in August. This was largely a result of continued growth in North East Hamilton, which grew from 14.3% in August to 15.9% in September.

"Three of the four areas in Hamilton eased, with South West Hamilton decreasing 1.8%, North West Hamilton decreasing 0.9% and South East Hamilton decreasing 1.0%, suggesting the market is finally beginning to slow as has been predicted by a number of commentators" said Richard Allen of QV Valuations.

"Although demand softened in most areas this did not have a negative influence on the average sale price in Hamilton which increased from $358,944 to $365,515. This suggests that the residential property market in Hamilton continues to exhibit some durability even though interest rates continue to increase" said Mr Allen.

"Expectations are that sales activity will decline as the interest rate increases impact. However, the general feeling is that sale prices are likely to remain fairly static rather than decrease" said Mr Allen.

Tauranga:
Tauranga property values grew 8.2% (calculated over the three months ending September 2007 in comparison to the same period last year). The growth rate is similar, but up slightly on the 7% reported for August.

"The Tauranga property market continues to be somewhat flat with relatively minor increases over the past 6 months" said Christopher Boyd of QV Valuations. "There was an improvement in the average sale price from $433,748 last month to $438,703 this month".

"Two major indicators usually considered when following market trends are sale prices and volumes. Sale volumes tend to show the greatest initial response and volatility in reflecting the confidence within the property market. Changes in sale prices, and hence changes in QV's growth rate index, tend to follow on from the pressures created by changing sales volumes" said Mr Boyd.

"Most parts of the Tauranga market are still showing small increases in property values but sales volumes have been in decline with numbers below half what the city was previously experiencing" said Mr Boyd.

Wellington:
Property values in the Wellington region increased by 16.3% over the past year (calculated over the three months ending September 2007 in comparison to the same period last year), down from 16.5% reported last month. The average sale price for the region was $447,243.

"The time delay between a change in the market and the subsequent change in property values creates opportunity for sellers and risk for buyers. The Wellington market is not showing normal spring activity, with a lower volume of sales" said Max Meyers of QV Valuations.

"Most areas of Wellington are showing signs of easing back with a slight drop in the average sale price. The exception is in the Hutt Valley where despite falling sales volume prices are still holding up" said Mr Meyers.

Christchurch:
Property values in Christchurch increased by 13.1% over the past year (calculated over the three months ending September 2007 in comparison to the same period last year) down from 14.1% reported last month. The average sale price for the city was $364,357.

"The lower end of the market continues to have the largest volume of sales. First home buyers and investors are still active in the lower price brackets while the upper end of the market is more cautious. Prices being negotiated for properties are generally static in Christchurch. This is also reflected by agents putting increasing pressure on vendors to be reasonable in their expectations" said Mark Dow of QV Valuations.

"Our valuers have noticed an increasing swing towards vendors using low fee agencies, many selling properties at around 1% commission. In the past there has been some caution at using lower cost agents, many fearing they might not achieve the best price. There is an increasing trend to use a valuer to remove any pricing uncertainties" said Mr Dow.

"The market in the provincial centres is mixed, with Selwyn, Waimakariri and Banks Peninsula all recording lower annual growth rates from last month, while Hurunui, Ashburton and Timaru continued to have improving annual growth" said Mr Dow.

Dunedin:
Dunedin's residential property values increased by 10.4% over the past year (calculated over the three months ending September 2007 in comparison to the same period last year), up from 9.6% reported last month. Over this period, the average sale price in Dunedin was $270,254.

"The easing of the annual growth reported last month has levelled off following a slight increase this month. Our valuers have reported increased inquiry over the last few weeks following a quieter period in late August and early September. This may be the result of the usual spring flush where the market traditionally picks up after winter" said David Paterson of QV Valuations.

"Agents are reporting a similar trend with increased listings and properties selling close to listing prices. There is some concern that the increase in listings may not be matched by a corresponding increase in demand and this may result in an easing in prices" said Mr Paterson.

"Different patterns of increases in property values are seen across the city. The central/northern part of the city is growing at 6.7%, a slower rate than last month at 7.3%. While Taieri at 12.6% and the southern part of the city at 12% have rebounded somewhat" said Mr Paterson.

Notes:

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.

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