Pace of property value gains almost halves in 2017 as market cools

New Zealand property values rose at almost half the pace of the prior year in 2017 as tighter lending criteria, restrictions on highly leveraged loans, and electoral uncertainty took the wind out of the local housing market, Quotable Value says.

National residential property values rose 6.6 percent to $669,565 in calendar 2017, almost half the 12.5 percent gain of the prior year and well off the 14 percent increase in 2015. Still, state-owned valuer QV figures show property values were 62 percent higher than the 2007 peak as cheap finance and a mismatch between housing supply and demand pushed up sale prices for several years during a period of solid economic growth.

That momentum subsided last year as the prospect of easy credit started to dim, while at the same time banks tightened up lending criteria and the Reserve Bank's loan-to-value ratio restrictions for investors helped take the heat out of the market. A hotly contested general election added to the uncertainty for potential buyers, which saw a dearth of activity in the lead-up to the September vote, which ultimately saw a regime change.

"The frenzy in the market of the previous three years induced by high numbers of investors in the market subsided and we saw a return to more normal levels of activity in housing markets around the country," QV spokeswoman Andrea Rush said in a statement. "Low interest rates, relatively high net migration and lack of supply means market drivers remain and we are likely to see values hold for the most part during 2018 in the main centres, but the trend of lower rates of growth is likely to continue."

Auckland has been a major driver of the rapid asset price gains in recent years, with the country's biggest city feeling the effects of the mismatch between supply and demand most acutely.

That abated somewhat last year, with Auckland values rising 0.4 percent in the year, but at $1.05 million it's still almost twice the 2007 peak, compared to a 20 percent increase in consumer prices over the same period and keeping pace with a 107 percent increase in the stock market's benchmark NZX 50 Index.

Hamilton and Tauranga had been beneficiaries of efforts to rein in the Auckland market, however, their gains also slowed in 2017, with property values rising 1.6 percent to $543,446 in 2017 and 3.2 percent to $693,725 respectively.

Wellington values climbed 9.4 percent to $574,410, while Christchurch values slipped 0.1 percent to $494,247. Dunedin property values gained 10 percent to $354,133.

The South Island's Mackenzie district reported the biggest gain in values in 2017, rising 24.7 percent to $511,978, followed by a 24.1 percent gain in South Waikato to $229,124.

The Buller district on the South Island's West Coast reported the biggest decline in values, falling 3.6 percent to $179,147, followed by a 1.9 percent decline in Auckland's Waitakere values to $824,271.

(BusinessDesk)