Property values continue to stabilise

Wednesday 10 June, 2009

The QV national residential property indices for May released today showed an 8.1 per cent decline in property values over the last year, a considerable improvement on the 9.2 per cent decline reported last month. This is the second month in a row where the year on year change has improved.

This improvement is due to continued stabilisation of property values in recent months, and contrasts significantly to a market that was declining sharply twelve months ago.

QV Valuations spokesperson Glenda Whitehead said “the recent stabilisation in values indicates that the wider market is moving toward some form of equilibrium. In many areas there continues to be strong interest in property, with more potential purchasers attending open homes, and more competitive offers being presented. Vendors have typically adjusted their price expectations to meet the current market, and buyers are presenting reasonable offers, knowing they have some competition. There is an obvious lack of new listings coming onto the market in some areas, this creates higher demand and therefore helps hold and even push values up slightly.”

“The recent buoyant activity in the residential market has been fuelled by people taking advantage of lower mortgage interest rates. Established investors are now back in the market along with first home buyers and those looking to upgrade” said Whitehead.

The national average sale price declined slightly to $371,555 in May from $372,981 in April, and is now 4.1% lower than the same time a year ago. Changes in sales prices are influenced by the composition of the sales occurring, and this composition has changed markedly over the last twelve months.

Over much of the last year, there has been a lack of activity at the lower end of the market, which has artificially held average prices higher. In recent months the market composition has changed again, with the lower end once again becoming more active. The QV Index methodology corrects for these composition changes and provides an accurate measure of changes in the property values.

“It is difficult to predict where property prices will go from here. The market is driven by a multitude of factors, but in the past interest rates, net migration and employment have been strong drivers. The rapid sustained growth of the housing market over the last few years, followed by the current unusual economic conditions, have shown many of the traditional factors are not reflecting directly in the current property market in the same way they have in the past” said Whitehead.

“Longer-term mortgage rates having risen sharply over the last few weeks and are likely to stay higher, unemployment is forecast to rise over the next two years, and dairy payouts are set to decline. All of these things would normally put further downward pressure on the market” said Whitehead.

“Forecast net migration is more positive, but the coming winter months are traditionally a slow period for the property market and will provide a true test for whether the recent property market revival will continue” said Whitehead.

Property values in all the main centres increased slightly in recent months. As a result the annual change in property values across the Auckland area has improved further from -9.0 per cent last month to -7.6 per cent. The Wellington area has also improved to -7.4 per cent, Hamilton to -7.5 per cent, Tauranga to -9.4 per cent, Christchurch to 8.1 per cent and Dunedin improved markedly from -8.0 per cent reported last month to -5.4 per cent.

Almost all the provincial centres also showed slight recent increases in property values. This has led to the year on year change improving to -12.8 per cent in Whangarei, -9.5 per cent in Rotorua, -14 per cent in Gisborne, -8.9 per cent in Palmerston North, -8.4 per cent in Queenstown Lakes and -10.3 per cent in Invercargill. New Plymouth remained steady at -5.4 per cent while Wanganui declined further to -4.5 per cent.

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