LVRs continue to bite – QV

While QV’s monthly house price index shows that national residential values rose in December, in some parts of the country values dropped.

National values rose by 1.3% over the past three months and by 12.5% year-on-year to reach an average value of $627,905.

Once adjusted for inflation, the annual increase dropped slightly to 12.2%, which leaves values 28.5% above the previous market peak in 2007.

However, the annual value increase recorded in December was up on November, which was the slowest rate since May 2016.

In contrast, QV’s December data indicates a significantly slower rate of value growth in Auckland where the average value dropped slightly to $1,047,179, from $1,051,387 in November.

It showed the Super City’s average value was up by 1.5% over the past three months, as compared to November’s data which showed a 3.7% rise over the past three months.

Further, the December data has Auckland’s value increasing by 12.2% year-on-year or, once adjusted for inflation, by 11.9%, as compared to November’s annual value increase of 12.6%.

This was the slowest rate of increase in the city’s annual value since January 2015 but, despite this, Auckland values remain 62.4% above the 2007 peak.

It was not just Auckland that saw a decrease in values and the rate of value growth.

QV national spokesperson Andrea Rush said December saw a continuation of the trend of a slowing rate of value growth, activity and demand in many of the main centres.

The trend has been in evidence since the introduction of the Reserve Bank’s latest investor-focused LVRs, she said.

“This coupled with the annual Christmas holiday period slow-down has led to a decrease in values in some parts of Auckland, Hamilton and Christchurch since November.”

“In Wellington values continue to rise faster than in Auckland - but at a slightly slower rate than prior to the LVRs being introduced.”

Dunedin also bucked the trend with value levels continuing to increase and sales activity remaining strong throughout the Christmas period.

But Rush said that a similar trend of plateauing/decreasing values was seen in the Auckland market over the summer period last year following the introduction of the last round of LVRs.

“In 2016, the Auckland market then picked up in March, which is usually the busiest month of the year, and it’s possible we may see this happen again.

“However, if interest rates continue to rise during 2017 this may further reduce demand from investors and lead to a longer period of lower value growth.”

She added that any slow-down will be balanced by the fact the market is still being driven by strong migration, relatively low interest rates and a lack of supply compared to demand, particularly in Auckland.

Meanwhile, activity and demand might be down in the broader Auckland market, but there are still some areas which are performing strongly.

For example, the Rodney District saw the region’s best growth over the past year.

Its values were up by 3.8% over the past three months and by 14.0% year on year, leaving the district’s average value at $929,162 in December.

QV’s Auckland general manager, Jan O’Donoghue, said properties with sub-division potential (under the new Unitary Plan) are still selling well and achieving record prices.

“This includes properties in areas that are close to up and coming town centres and have good transport links, in suburbs such as Mt Wellington and New Lynn.”

“Units that don’t have sub-division potential are less popular because there is low expectation of achieving capital gains.”