Shaking up the Canterbury property market

The September 4 earthquake that struck Canterbury left over 95% of properties with no significant damage, according to a QV assessment of the regions property market.

Tuesday, January 18th 2011, 12:00AM

by The Landlord

The report measured the effects of sales in the area looking at the number of sales that took place before and after the earthquake in affected and unaffected areas and how property values changed before and after based on sale prices.

Using the Tonkin and Taylor report for the Earthquake Commission QV was able to identify the three areas that suffered the most significant land damage; Waimakariri District, Christchurch City and Selwyn District.

"The report shows that less than 5% of the properties in the Canterbury region suffered significant land damage through liquefaction or lateral movement," the report said.

"Over 95% of properties in the region suffered no significant land damage."

Harcourts South Island business development manager Jim Davis confirmed that "there are some areas of the city harder hit than others."

He has also seen a spike in demand for rental property in the region as the area "wasn't oversupplied prior to the quake anyway."

At present Davis believes the market presents opportunities for the rental investor as property in some of the more affected suburbs is "relatively cheap."

Martin Evans, the A1 Property managing director and president of the New Zealand Property Investors Federation, also believes opportunities exist in the rental sector.

He said property on land affected by liquefaction is available and "investors can buy fairly reasonably."

Likening the liquefaction-affected areas to houses under power lines, he says that while less attractive to owner/occupier buyers those looking to rent are less bothered by such issues.

"As a tenant they've got no risk," Evans said.

The combination of a reduction in stock due to earthquake damage and the influx of workers is also helping the rental sector. Davis said he has seen "a huge number of extra people in the region" and that "a good rental may have a number of people chasing it."

One less positive effect highlighted by Evans for the rental sector concerns tenants in slightly damaged but livable homes. He said some may seek rent reductions and when tenants move on it would be "interesting to see how easy it will be to sell" such properties to new tenants.

QV compared sales before and after the quake in areas affected and unaffected by the earthquake.

"Not surprisingly, there have been almost no sales of properties in badly damaged areas since the earthquake. Almost all of the sale since the earthquake are from outside the damage zones, and are therefore likely to be undamaged or only lightly damaged."

In the months leading to the earthquake residential and lifestyle sales had been declining in Christchurch City from 726 sales in April to 575 sales in August.

In the first week after the earthquake there were only 42 sales, in the second week 58. This increased in subsequent weeks and there were 337 sales in the month after the earthquake.

"If the pre-earthquake downward trend in the number of sales had continued, we could have expected about 530 sales in September, so the 337 sales that occurred represent a 37% decline in volume."

In Waimakariri District sales volumes had also been dropping in the months before the earthquake, from 100 sales in April to 87 in August. The 57 sales in the month of the earthquake was therefore a decrease of 24% below trend.

In Selwyn District the number of sales in the previous month varied between 65 and 85 sales, and this dropped considerably to 27 sales in the month of the earthquake, 60% below trend.

When it comes to values before and after the earthquake in the five months prior to the earthquake houses in Christchurch City were selling on average capital value (CV). This gradually declined to 3.9% below CV in the month before the earthquake. In the month of the earthquake this figure jumped to 2.9% below CV and in the following month was 1.7% below CV.

"Assuming that the downward trend in values would have continued if the earthquake had not happened, then the house values increased by 1.4% above the trend in September and by October had increased 3.2%."

QV said the apparent increase was driven an increased demand for undamaged properties both from within the region and from those arriving to assist with the rebuild.

Values in Waimakariri were also moving down prior to the earthquake, from 2% above CV a few months earlier to just above CV immediately before the earthquake. In the month of the earthquake that downward trend reversed with values increasing to 1.2% above CV. However, based on only a few sales, values in October appear to have increased a little further and are 3.2% above the previous trend.

Selwyn District saw variable values in the months before the earthquake. In the month immediately after values dropped 2.7% below the previous trend, and appear to have dropped further since, though QV did caution "there are still too few sales to be certain."

QV found that in the month of the earthquake the number of sales dropped by 37% compared to pre-earthquake levels, but that activity is beginning to pick up and "local QV valuers are reporting healthy interest in the property market, driven both by locals and people coming from outside the region to assist the repair and rebuild." 

« Wanganui: Returns in the river cityLatest house price updates »

Special Offers

Commenting is closed

www.GoodReturns.co.nz

© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved