Slowdown in value growth spreading

Spread of low annual property value growth means investors should be wary of capital gain promises in the regions, according to CoreLogic.

Wednesday, August 30th 2017, 4:30PM

by Miriam Bell

CoreLogic NZ head of research Nick Goodall

The property data firm’s latest housing market update shows it’s been a bleak winter for the market with activity down and low rates of annual value growth nationwide.

CoreLogic NZ head of research Nick Goodall said that market activity was now ambling along at seasonally low levels of up to 30% below last winter

This combined with an already strong drop in sales volumes highlights that the market slowdown remains and they expect it to continue for some time, he said.

“Property value change is variable too with some areas of New Zealand, including Auckland, now showing value decreases”.

The report reveals that nationwide annual value growth has dropped to 6%, which is the lowest in over two years.

This reduction in growth was most evident in the main centres, particularly Auckland which saw 5% annual growth and no increases in value since October last year.

Auckland is also now showing a distinctive increase in the number of suburbs experiencing decreasing values over the last three months.

For example, Mount Wellington has dropped 3.0% since April.

Goodall said that in the provinces value growth looks to be holding to some degree with 14% annual growth.

“But this has consistently fallen away since the start of the year and, based on current market activity and slowing migration to these areas, the growth is unlikely to last.”

Property buyers should be wary of expansive promises of capital gain in these areas, he said.

CoreLogic had better news on the rental growth front, with annual rental growth recently showing a strong lift.

Goodall said annual rental growth is up to 6.5% - which now exceeds annual property value growth and, historically, is relatively unusual.

Meanwhile, the report’s analysis of buyer classification data confirmed there has been some major changes in the market.

Goodall said the surge of investors buying in Hamilton over the past two years is well and truly over.

“This will be due to a combination of rising values in Hamilton reducing gross yield plus the difficulty in securing mortgage funding.

“A change of behaviour is also evident in Christchurch, with multiple property owners consistently less active following last July’s Reserve Bank announcement of lending restrictions.”

Uncertainty caused by the looming election and the reduced availability of credit is expected to continue to affect demand.

Goodall said that, for these reasons, a prolonged slowdown, lasting towards the end of 2017 is anticipated.

“But, ultimately, even after taking affordability concerns in Auckland and elsewhere into account, strong fundamentals - including a positive economic outlook - remain.

“Property values could therefore rise again in the New Year: albeit at a more modest pace than the previous two.”

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