Property value growth nationwide increased by 1.3% in October and that came on top of a 0.8% lift in September, according to the latest CoreLogic House Price Index.
All 21 of the urban areas analysed experienced value growth over October, with Wellington emerging as the leader of the value growth pack among the main centres.
Values in the Capital’s market grew by 1.7% over the month, by 2.8% over the last quarter and by 11.1% year-on-year. That left Wellington’s average value at $811,099 in October.
The uptick in values was also very evident in Auckland, with the 1.4% growth experienced in October taking the city’s average value to a record high of $1,093,405.
Growth of 1.5% over the past quarter has more than made up for the 1.2% dip in values witnessed in the three months following the end of the alert level three lockdown in May.
In Dunedin, values are starting to increase again (up 1.3% in October) after a post-lockdown slowdown, while Christchurch has seen consistent modest growth for the last year, with the annual growth rate now exceeding5% for the first time since March 2015.
Even Queenstown saw some value growth (of 0.8%) in October, although values there remain 1.2% lower than at the end of July and 5.6% below the peak before Covid hit the market.
CoreLogic head of research Nick Goodall says values have remained robust since the onset of the economic downturn catalysed by Covid-19 – and the property market is now growing at a faster rate than before Covid.
“The wage subsidy and mortgage deferral programmes have helped cushion the market, while the Reserve Bank’s intervention (in terms of lowering interest rates and the temporary removal of LVRs) now appears to be boosting demand and contributing to the uplift in value growth.
“Indeed, the Reserve Bank has acknowledged a consequence of its monetary policy is increasing asset prices, but that this is a better outcome than the counter-scenario of a loss in confidence, resulting in decreasing property values.”
A lack of supply of available properties on the market is also a key contributor to increasing prices, with listings hovering at all-time low levels across the country.
CoreLogic’s partner Trade Me Property’s data shows there has been no improvement in supply in the last year, with the number of properties for sale nationwide in September remaining flat on the year prior.
Going forward, the role of the LVR limits, as well as the new Government’s plans on increasing housing supply, are likely to be at the forefront of discussion on the housing market, Goodall says.
Despite the increase in investor lending above 70% LVR, he doesn’t think the Reserve Bank will reinstate the LVRs before March next year due to technical reasons around the mortgage deferral scheme.
But the fact that Resource Management Act reform came to the forefront of election politicking suggests it’s likely most housing announcements will centre on Government construction plans.
Goodall says the construction industry has so far shown impressive resilience – even now the wage subsidy programme is winding down – which is good for the supply side of the market equation.
“The next major milestone will be the end of the mortgage deferral programme, now pushed back to March 2021, but if interest rates reduce further and demand for property holds strong, it’s hard to envisage a lift in motivated sellers causing values to seriously drop.”
Short-term demand is looking very strong, with valuations ordered by banks for mortgages up 11% month-on-month after a noticeable jump at the start of October, he adds.