Slowdown continues for property values

QV's February statistics for the residential property market report a 7.7% growth in national property values over the past year, down on the 8.9% growth reported in January. The average New Zealand sale price increased to $393,240 this month (from $390,636 last month).

"The property market is fairly subdued despite most areas in the country still experiencing good 'year on year' growth in property values, but the rate of this growth is slowing rapidly. Banks have lifted their mortgage rates, properties are staying on the market for longer, and the volume of sales is really dropping. There are less active buyers and sellers in the market, with those keen to sell having to accept lower offers," says QV spokesperson Blue Hancock.

"Clearly the market is slowing down and taking a breather, and we expect this will continue given the current market conditions. It looks like we may be in for a sustained period of less activity in the property market," says Hancock.

He thinks the cooling period will continue until such time as interest rates drop.

The drop off in activity is particularly evident at the bottom end of the market, which Hancock says is achieving “pretty average” sale prices. He says this will be hitting investors and first homebuyers.

Investors won’t be keen to given the low yields on rental properties – now combined with the eroding capital gain growth rate. Instead, Hancock expects investors will be waiting in the wings, saying “cash is king right now”.

ANZ chief economist Cameron Bagrie says credit conditions will be the biggest property market driver for the next 12-24 months.

He says there has just been a turn in the credit cycle that has seen risk be more correctly priced – therefore pushing up interest rates. Financiers are now likely to be more circumspect with their lending, says Bagrie.

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