Mixed year but outlook bright

The nationwide average residential property value increased 4.9% over the year, to $488,674 in December.

It lifted 1.5% over the final three months of 2014 and nationwide values overall are now 17.9% higher than the previous market peak reached in late 2007.

Auckland’s values increased 9.8% from an average $693,549 in December 2013 to $761,858 in December 2014.

They are now more than a third higher than they were in 2007.

Sales volumes were also down compared to 2013 for every month despite picking up towards the end of the year.

QV spokeswoman Andrea Rush said: “After a slow start to the year following the introduction of the LVR speed limits, values picked up in February and March but then following four interest rate hikes during March and July value increases plateaued. The prospect of further interest rate rises in the lead-up to the election seemed to cause some uncertainty as to whether the market had peaked and this led to a slowdown in the market during the middle of the year.”

She said that once the election was over and it was clear interest rate rises were on hold, there was a surge of new listings and activity in the market.

“The return of relatively low interest rates offered by the banks with cash incentives coupled with record migration levels has since led to a strong reacceleration of values in the Auckland.”

Values in the former Auckland City area were up 10.4% year-on-year to December 2014 but up 5.3% in the last three months of 2014.

Waitakere City homes values also were up 10.7% year on year to December and 4.4% since the beginning of October. North Shore City was also up 8.9% year on year and 3.3% in the last three months of the year.

Values in Hamilton also surged ahead in the last three months of the year; up 3.2% year on year and 2.6% since October. Tauranga home values increased 3.7% year on year and 1.4% since October.

Home values in Wellington City are also showing a recent upturn, increasing 1.4% year-on-year to December and rising 1.4% since October after showing a downward trend in the middle of the year.

Christchurch increased 3.2% year on year and 1.8% since October.

Many of the provincial centres were impacted by the loan-to-value speed limits harder than the main cities with record low listings, minimal sales activity and little value movement.

Whangarei District values increased 0.7% in 2014 while Rotorua District saw values decrease 1.8%; as did Hastings District down 1.4% in the year to December 2014 while Napier City values were up 1.6%. Nelson City values also rose 2.0% as did Invercargill City values up by 0.5% in 2014.

Satellite towns to Auckland and Christchurch as well as Queenstown Lakes District and New Plymouth saw the largest value increases while Gisborne and Wanganui saw the greatest declines in value.

CoreLogic director of research Jonno Ingerson said sales activity was very low over the year. Loan-to-value restrictions had changed the type of buyers in the market.

Immediately after the introduction of the LVR limits the percentage of sales to first home buyers dropped from 20% to below 17%.

But this gradually recovered during the year to end at around 18%. The number of sales to people owning more than one property increased during the year from 37% to 41%.

But perhaps the most obvious change was the drop in sales to people moving from one house to another. This dropped from 30% of the sales to under 25%.
This drop in movers also happened in 2008 and again in 2010 as the GFC affected consumer confidence.

“For the property market to return to a more normal mix of buyers we would need to see this mover group becoming more active again,” said Ingerson.

Ingerson’s expectation is that sales turnover will remain buoyant in the first few months of 2015. However the lack of listings will continue to constrain the market.

“Given strong migration, continuing low interest rates, a shortage of housing and good consumer confidence, values are likely to keep increasing in Auckland throughout this year. There may be modest increases in some of the other main centres, but most smaller centres are likely to remain steady.”

The Reserve Bank has also stated that it is prepared to introduce further measures to slow down the market if necessary.

“Given that during the last three months of 2014 Auckland values rose faster than they did during the 2003 to 2007 boom, and some of the other main centres are also rising again, the Reserve Bank is likely to consider what action to take,” said Ingerson.