There have been many reports in the media about the performance of the property market — more opinion than fact. Over the years you’ve been reading my updates, you know me well enough to know that I like the facts.
There are some key drivers in any property market: employment levels, net migration, crowding, property sale volumes, construction, affordability, rents, and number of days to sell property to name a few. All of these remain at relatively stable levels.
The first home buyer market is certainly buoyant (new mortgage registrations rose from 24.8% to 26.4% last month) with lenders easing up on restrictions along with attractive interest rates — with no predictions of tightening anytime soon.
Changes to LVR's
The RBNZ Financial Stability Report released on Wednesday the RB noted the slowing in mortgage lending growth and house price inflation. In response they have cut the minimum deposit requirement for investors from 35% to 30% (having cut it from 40% a year ago). And banks may now have up to 20% of their lending to owner occupiers at less than 20% deposit. This had been 15% from the earlier 10% percentage of volume limit.
Will these changes affect property values?
Not really. At least, they certainly won’t lead to large rises in house prices, but the changes should bring further stability to the market. Remember when they imposed the changes as the market was rising? They were never to bring house prices down, they were just to slow the growth and stabilise the market. Now it’s the reverse.
The sellers market has passed (2 years ago), but the balanced market environment we are presented with is a healthy one. Values remain relatively stable along with stock levels and sales volumes. I see this property climate remaining similar for a few years yet.
Speaking of heat, after quite some time the news is no longer filled with headlines of the outrageously hot Auckland housing market, record high house prices or housing unaffordability.
The latest statistics in from the Real Estate institute of NZ showcase the median sale price across New Zealand as having dropped $4000 to $516,000 in December.
In Auckland, the median sale price last month was $840,000, down 1.4% on November's $852,000 ($868,000 in October).
Sales volumes in Auckland were down by 2% and, nationally, sales dropped by 11% comparing December 2016 with December 2015.
What this says is that, while there are still plenty of buyers, the rush has slowed and we are now in a more balanced market.
Over the past six months we’ve seen properties starting to take longer to sell. This is due to a number of factors, but has resulted in sellers needing to adjust their perceptions somewhat and buyers now being able to take their time just a little more.
Ongoing supply issues and a growing population in Auckland are being countered by higher fixed rate home loans and the 40% LVR on investment properties.
REINZ's CEO Bindi Norwell says the underlying trend is one of rising prices across New Zealand coupled with flat or falling sales volumes in many areas of the country. "In Auckland, the long-term median price trend has been consistently rising, despite a slight easing compared to November 2016," she says.
Let me finish by positing that with a balanced market comes an element of stability; and stability and balance protect against a housing bubble: prices remain strong (even if their year-on-year growth is at a more steady rather than stratospheric rate); and increased supply and known affordability encourages and entices buyers into purchasing a home.
Although the market in Auckland is traditionally quieter during this time, sales have still been ticking along.
The latest sales statistics from QV show that the Auckland values rose up to 4.2% at the end of this year, in the last 3 months alone. Nationwide property values increased 4.9% annually, and 1.5% over the past three months. This puts nationwide values 17.9% higher than the previous market peak reached in late 2007.Auckland values rose at almost twice the rate of the rest of New Zealand, up 9.8% (by $68,309) in the last year, and are being picked to shoot up even further this year.
Jonno Ingerson, director of CoreLogic, said the outlook for this year was for values to continue up. Jonno predicts that the sales turnover will remain healthy and steady, but the constraint of new listings will be the factor in rising values. “Given strong migration, continuing low interest rates, a shortage of housing and good consumer confidence, values are likely to keep increasing in Auckland throughout this year...”
Given that during the last three months of 2014, Auckland values rose faster than they did during the 2003 to 2007 boom, the Reserve Bank says it is prepared to introduce further measures to slow down the market if necessary.
This would most likely include lending restraints as the interest rates are unlikely to rise until later on in the year.
Manukau City values rose 9.5% on year and 3.3% since October '14 Waitakere City homes values rose 10.7% on year and 4.4% since October '14 North Shore City values rose 8.9% year on year and 3.3% since October '14 Papakura District values were up 10.6% and 5.6% since October '14