Property value growth slows in September as election weighs on listings

Annual growth in New Zealand property values continued to slow in September, staying below 5 percent, with the normal spring surge in listings not eventuating which kept the market from dropping further.

The QV house price index rose 4.3 percent in the year to September, down from an annual increase of 4.8 percent in August, state-owned valuer Quotable Value said. Values increased 1.1 percent to a national average $646,378 in the three months ended Sept. 30, still 56 percent higher than the previous market peak in late 2007.

The slowdown was again led by Auckland, where values rose 0.8 percent in the year, and were down 0.6 percent in the rolling three-month average. The region's average house value is $1.04 million, up 91 percent on 2007's peak or 59 percent on an inflation-adjusted basis.

New Zealand's house price growth has calmed since banks introduced tighter lending conditions and started indicating interest rates would begin rising. The September general election has also had cooling effect with a lack of clarity before polling day and special votes still being counted before coalition negotiations can formally commence.

"While there is uncertainty around who will govern the country in the coming weeks, there are policies that if agreed upon under a coalition government could influence the property market," QV spokesman David Nagel said. "These include a gradual reduction in immigration numbers which has previously helped fuel the property market, particularly in Auckland and the increase in housing supply. What will be most interesting will be whether a new government supports the relaxing of the Reserve Banks LVR (loan-to-value ratio) restrictions as well as what support policies get rolled out to help first home buyers get onto the property escalator."

In Auckland, senior consultant James Steele said volumes were at very low levels, with few incentives for owners to sell as rents remain high and interest rates low. However, first home buyers now have less competition from investors for entry-level homes, and prices for new houses in large subdivisions where speculation was a large part of the market have dropped, he said.

"The Auckland market has continued to flatten and we remain in a stalemate situation until a significant economic shock destabilises prices by further reducing demand/the ability to purchase and puts pressure on homeowners to sell, or lending restrictions are eased allowing built up demand and limited supply to send prices upwards again," Steele said.

Wellington region property values dipped 0.5 percent to $606,322 in the three months ended Sept. 30 for a 9.6 percent annual gain, while in Wellington city values rose 0.8 percent in the quarter and were up 11 percent in the year to an average $732,708. Senior consultant David Cornford said Wellington "continued to be a seller's market" but 2016's value growth had dissipated.

Christchurch city values dropped 1 percent to $491,626 in the rolling three-month period for an annual fall of 0.8 percent, while Dunedin property values rose 1.4 percent to $380,701 on a three-monthly basis for an annual increase of 12 percent.

In Hamilton, house values rose 1.3 percent in the three months to Sept. 30 and were 3.2 percent higher than a year earlier. The city was an early beneficiary of the slowdown in Auckland as investors shifted their focus further afield, but there now appears to be more hesitation from buyers and sellers ahead of the election results, property consultant Andrew Jaques said.

Tauranga, another centre which saw house prices rise due to investor interest, saw values down 0.1 percent in the quarter and up 6.6 percent annually, pushing the average value to $696,759. Spokeswoman Melanie Lewis said investors had dropped off and rent has stabilised, but areas like Mount Maunganui and Bethlehem continued to be popular.

Hawkes Bay values continued to rise strongly, with Napier up 18 percent annually and 5.2 percent in the quarter to an average $465,943 while Hastings has seen an 18 percent annual gain and 2.8 percent quarterly rise to $431,805.

"Although values have increased from last year and in the last three months, the market appears to have had some heat lifted," said property consultant Rachael Walker. "Although values are remaining strong across most markets, we understand purchasers may be cautious over the coming weeks until the election result becomes clearer."

(BusinessDesk)