Winter chill settles on market

It is well recorded that values in the main centres, and notably in Auckland, have been easing for some time.

But the latest QV House Price Index shows that nationwide values in June actually dropped by 0.3% over the past three months, leaving the average value at $675,680.

Nationwide values still turned in an annual increase of 4.6%, once adjusted for inflation. Yet the rate of annual growth is on the decline too: in May it was 5.8%, in April it was 6.4%.

At the same time, value growth in the main centres has also continued to either drop or flat-line.

Values in the Auckland Region were down by 0.2% over the past quarter and, once adjusted for inflation, they fell by 0.3% year-on-year. This left the region’s average value at $1,053,575 in June.

In the Wellington region, values were down by 0.8% over the past quarter – although, once adjusted for inflation, they were up by 4.8% year-on-year. This left the region’s average value at $639,112 in June.

In Christchurch, values were down by 0.3% year-on-year but up slightly by 0.1% over the past quarter, leaving the average value at $494,707.

QV general manager David Nagel says the data confirms that values are continuing to moderate or drop after a sustained period of growth leading into winter.

While this may be the case, they are observing challenges around seller expectations on sales prices, he says.

“After a sustained period of national value growth, sellers can sometimes have an inflated – even unrealistic - view of the value of their property. This is resulting in slower than usual average time to sell properties across some areas.”

The LVRs and new Government regulations have reduced investor demand and this has reduced competition, giving buyers more time to do their due diligence before purchasing, Nagel says.

“As a result, regions such as Auckland are seeing an increasing number of sales through negotiation as opposed to auction as vendors show more flexibility in order to sell their property in a less buoyant market.”

He adds that, despite the slowdown in activity, there is still plenty going on in markets around the country.

In Christchurch, infrastructure improvements appear to be contributing to an increase in demand for new builds in the CBD, for example.

Also, the growth of suburbs on the outskirts of the main cities continues, he says.

“With high values remaining in most of our cities, more affordable suburbs on the outskirts continue to appeal particularly to first home buyers. This is a common theme across Auckland, Tauranga and Wellington in particular.”

In the short term, Nagel says he doesn’t anticipate any significant changes to current market conditions. “That means values are likely to remain fairly constant or steadily grow across most of New Zealand throughout winter.”