Mixed signals in the property market

Media release
5th September 2008

Embargoed to 11.59pm Sunday, 7 September 2008

Mixed signals in the property market

QV's August statistics for the residential property market report a 4.5% decline in national property values over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down on the 2.2% decline reported in July. The average New Zealand sale price reduced slightly to $391,487.

“Property values continue to fall across the country with all main and provincial centres now showing values lower than they were 12 months ago” said Blue Hancock of QV Valuations. “There are definitely more properties selling at reduced prices as vendors adjust their expectations. Areas on the fringes of main centres and holiday homes are particularly affected as increasing commuting costs and decreasing discretionary spend become key considerations” said Hancock.

“The market has been out of equilibrium with a lack of buyers, however there are early signs of a more positive mood. Many buyers are realising that price decreases are making this a good time to buy, and that they can bargain strongly. As a result there will be further declines in value before the market levels out” said Hancock.

“Some investors also appear to be re-entering the market, particularly in Auckland and Wellington, as they pick up well priced properties. However across the country investment returns are being impacted by an increase in properties available for rent, higher mortgage payments, and an outlook of minimal capital growth” said Hancock.

Across the Auckland area property values are down 5.8% compared to the same time last year, declining further from the -3.6% reported last month. Hamilton City’s values have slipped further to -8.5% and Tauranga to -5.3%. The Wellington area has also declined further to -2.9%, Christchurch to -5.8% and Dunedin to -7.8%.

All of the main provincial centres are now showing property values less than the same time last year. Whangarei has declined -4.1%, Rotorua -0.3%, Gisborne -10.4%, Napier -3.6%, Hastings -4.1%, New Plymouth -4.8%, Wanganui -4.5%, and Palmerston North -8.1%. In the South Island, Nelson dropped further to -3.7%, Queenstown Lakes to -3.4%, and Invercargill becomes the last of the provincial centres to drop into negative growth at -0.1%.

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Auckland

Property values in the Auckland region declined by 5.8% over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down further from the 3.6% decline recorded in July. The average sale price for the region decreased to $503,026.

“Continuing the trend reported last month, QV’s residential price movement shows a further easing in the residential market in comparison to where it was a year ago. While it is too early to suggest we have hit the bottom of the market, the general mood around town seems to be a bit lighter. We have had reports from all over Auckland that buyer enquiry has picked up and “sold” signs are also more conspicuous around the city” said Glenda Whitehead of QV Valuations.

“In terms of property values, feedback from our valuers suggests that either the market in some areas has slipped further than we initially thought, or that panic sellers have bailed out of some areas. This is evident for example in Te Atatu Peninsula, where very low values have been realised through the midst of winter. On the flip side, a well maintained home in a central area, such as Greenlane, Epsom or Remuera, is more likely to sell at a smaller discount compared with previous levels. Our valuers are observing variances in values for the same type of property within an area; these inconsistencies suggest that sale prices are reflecting sellers' circumstances such as an urgent need to sell, not just a general market trend” said Whitehead.

“Property values in Manurewa have declined. Where previously you might have paid $350,000 for a home, you may now pick up that same property for under $300,000. However, turnover in Manurewa is relatively good, perhaps suggesting vendors are accepting prices in line with the market trends. In contrast, the drops in value have been less severe in some of the older established areas such as Howick, Pakuranga and Bucklands Beach where higher value properties may be staying on the market longer to achieve the desired price” said Whitehead.

“Indications are that the declines in the apartment market are easing, with buyer interest perhaps sparked by greater affordability” said Whitehead.

Hamilton

Property values in Hamilton declined by 8.5% over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down further from the 5.4% decline recorded in July. The average sale price for the city declined further to $335,292.

“The downward trend in property values in Hamilton City continued in August, dropping to a new low of -8.5% year on year. This decline has been driven by a lack of confidence in the residential property market and high interest rates which are continuing to curb demand” said Richard Allen of QV Valuations.

“The sharpest decline in property values is evident in the North East which decreased from -4.1% in July to -7.3% in August, and the South East area which moved from -5.2% to -9.7%” said Mr Allen.

“The market environment now strongly favours buyers and that many properties are selling at reduced prices. The poor health of the residential property market has been reinforced by the average sale price for the city which fell for the third consecutive month, declining sharply from $353,278 in July to $335,292 in August, the lowest point since February 2007” Mr Allen said.

Tauranga

Property values in Tauranga declined by 5.3% over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down from the 2.6% decline reported last month. The average sale price increased to $445,203.

“There have been some signs of a reprieve in the subdued Tauranga property market over the last month. Feedback from leading Real Estate Agents is that the number of enquiries is up and so too are open home attendances. We expect the number of house sales to trend upwards ever so slightly in the short term. This can be put down to the changing of the seasons and potentially to some buyers believing that the market has hit its low point. While this small burst of activity may not last, it does show that vendors are more open to the offers that are being tabled” said Shayne Donovan-Grammer of QV Valuations.

“The current environment presents a good opportunity for first home buyers to enter the property market. There are plenty of options available and if buyers do their research properly there are definitely some good buys to be found” said Mr Donovan-Grammer.

“The $500,000 to $700,000 price bracket remains particularly sluggish, as do section and apartment sales. Some of the sales which are occurring in these areas are showing significant reductions in value from what they were this time last year. This further substantiates that buyers have the upper hand with the luxury of choice” said Mr Donovan-Grammer.

Wellington

Property values in the Wellington region decreased by 3.8% over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down from 1.6% decline reported last month. The average sale price for the region decreased from $451,869 to $437,061.

“All areas throughout the Wellington region are showing declining property values. The drop in values ranges from 6.1% year on year in Upper Hutt, through to 1.2% decrease in the Eastern Suburbs of Wellington. Average sales prices are also dropping across the region down $11,200 compared with the same period last year and $14,800 from last month” said Max Meyers of QV Valuations.

“We note that for Upper Hutt, Hutt City, Porirua and Wellington, over 70% of the sales are now below last years rateable values. This has increased notably from last month and reinforces the change in the market over the past year” said Mr Meyers.

“The QV statistics show a persistent decline in values that we expect to continue for the next few months. Some buyers are being attracted by the lower prices and some of the older stock is starting to sell. If this trend continues we can expect to see volumes begin to increase and the market may gradually return to more normal levels of activity, but without the property price rises of the past few years” Mr Meyers said.

Christchurch

Property values in Christchurch decreased by 5.8% over the last year (calculated over the three months ending August 2008 in comparison to the same period last year) down from 2.1% annual decline reported last month. The average sale price for the city decreased by $7,384 to $358,014.

Within Christchurch City the Eastern suburbs have suffered the largest decline in value over the last year with a fall of 7.2%. “This reflects a movement towards better-quality homes and locations, and a tougher market environment for investment properties and modest housing” said local QV manager Mark Dow.

All locations in Canterbury have suffered declining values from those reported last month. The hardest hit is Banks Peninsula which decreased 7% on its position in July, taking it to -3.4% year on year. “Generally we have noticed a larger impact on properties located on the outskirts of city that have greater commuting distances. There is also less interest in the holiday home market with the change in the economic conditions” said Mr Dow.

“Spring is now upon us and there are some signs of increased interest in the property market. However, given the volume of house sales is so low compared to our normal level, we are still well short of a turn around in fortunes for the local housing market. Price pressures are likely to be with us for sometime yet, which is good news for those wishing to purchase or those intending to trade up or down” said Mr Dow.

Dunedin

Dunedin’s residential property values decreased by 7.8% over the past year (calculated over the three months ending August 2008 in comparison to the same period last year), down further from the 6.8% decline reported last month. The average sale price in Dunedin increased slightly to $277,790.

The rate of the decline in property value is greatest in the Southern part of the city where values have decreased 9.5% year on year. In contrast, the Taieri area decreased by 6.9% over the same period.

The average sale price increased by $3,898 compared with July. This figure has been skewed slightly as a result of three sales over $1m recorded in the figures.

“There is anecdotal evidence that we may be seeing a slight improvement in the market. The rate of decline reported in August is less than it has been for some months, potentially signalling that the market is starting to level off. Agents are reporting more interest from buyers and an acceptance from some vendors that they need to meet the market if they wish to sell. This change has resulted in the sale of a number of properties that have been sitting around for some time” said David Paterson of QV Valuations.

“While these trends are positive, it is too early to say that we are over the worst of the market correction. We are likely to see values continuing to decline albeit at a slower rate in the short term, followed by a sustained period of little or no growth as the market catches up” Mr Paterson said.

QV RESIDENTIAL PRICE MOVEMENT REPORT - AS AT August 2008 (PDF)

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