Property values decline

15 June, 2010

Property values across New Zealand are 5.6 percent above the same time last year according to the QV residential property indices for May. This is the first decline in the annual change since March 2009, having fallen back from the 6.1 percent reported last month. Nationally, values are now 4.1 percent below the market peak of late 2007, down from the 3.9 percent reported last month.

“The decline in annual change is being driven both by what was happening this time last year, and what has happened in recent months. At this time last year values were beginning to increase again after reaching their low in April 2009. They continued to increase until christmas before flattening for the first few months of this year and now beginning to decline slightly. As a result the gap between values this year and last year is closing, and will continue to close further over the coming months” said Jonno Ingerson, Research Director for QV.co.nz.

“The national average sales price for the three months to May also decreased slightly to $403,070 from $405,235 in April. The average sales price moves roughly in line with the QV index but can be biased depending on which part of the market is more active at that time. As a result the QV index is a more accurate measure of changing values” said Ingerson.

“The supply and demand balance is quite different now compared to last year. In the second half of 2009 consumer confidence was returning after the recession and this flowed into the property market. Enthusiastic buyers were competing over a relatively short supply of properties and as a result prices were pushed up.

In the early months of this year more properties came onto the market, but at the same time buyer confidence wavered as pre-budget announcements and talk of rising interest rates put uncertainty into the minds of both investors and home owners. The resulting increase in properties for sale combined with less demand has subsequently begun to push prices down” Ingerson said.

“The low activity levels over the past few months were in part due to buyers waiting for the budget announcement. With the various tax changes still some time away, any effects are likely to take some time to flow into the market. There is little evidence so far of a change in buyer or seller sentiment with QV valuers across the country reporting no increase in the number of enquiries. As a result we expect that sales volumes will remain static over winter” said Ingerson.

“While the changes to tax treatment of investment property may have some downward impact on the lower value end of the market in some areas, it is unlikely that the changes will cause prices to drop across the board. Instead we expect the general lack of buyer confidence and low sales turnover to continue to put downward pressure on prices in the short term” said Ingerson.

Values in all the main centres have flattened or declined in recent months leading to a decrease in the annual change in values. Values across the Auckland area are 8.8 percent above last year, back further from the 9.5 percent reported last month. Hamilton values have dropped to 1.7 percent above last year, Tauranga to 0.4 percent, and the Wellington area to 6.0 percent. In Christchurch values dropped back slightly to be 6.2 percent above last year, and a further decline in Dunedin saw the annual change drop to 4.8 percent compared to last year.

The provincial centres remain more variable both in terms of the change since last month and in comparison to the same time last year. Napier (6.5 percent above last year), New Plymouth (6.9), Palmerston North (6.7), Nelson (6.3) and Invercargill (5.4) remain significantly above last year. Gisborne (1.2), Wanganui (1.3) and Queenstown Lakes (0.8) are slightly above last year, whereas Whangarei (-0.7 percent) and Rotorua (-0.8) are now below the same time last year.

Click here to read full press release