Prices up but turnover slowing:QV

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The first sign of the impact of loan-to-value restrictions has been a drop in the number of listings, Quotable Value says.

Tuesday, January 14th 2014, 12:00AM 1 Comment

by The Landlord

It has released its latest statistics, which show that nationwide residential property values increased again in December.

Values are up 3% over the past three months, 10% up over the past year, and 12.5% above the previous market peak of late 2007.

Research director Jonno Ingerson said most of the nationwide increase in values was driven by strong increases in Auckland.

“A comparison of the main centres shows how much the nationwide annual increase of 10% was pushed up by Auckland and Christchurch. From the North Shore to Manukau values increased between 15% and 18% annually, and values in Christchurch went up 12.7%. In contrast, the rest of the main centres increased between 2.5% and 4.0% apart from Hamilton, which was slightly higher at 5.8%.

“Considering that values in Auckland have now been increasing since early 2011 it is not surprising that they are now 27% above the previous 2007 market peak. Likewise values in Christchurch are 20% above the previous peak. Tauranga remains 8.2% below peak, while the Wellington area, Hamilton and Dunedin are just above or below previous peak levels.”

Ingerson said the trend in the provinces was less clear.

“Apart from Wanganui and Queenstown all the provincial centres increased during 2013, but the increases were less than 5%. The exceptions were Gisborne which increased by 5.5%, and New Plymouth 7.3%.”

Only in New Plymiuth and Nelson are prices beyond their previous peak.

“Compared to 2012, sales volumes dropped in many of the provincial centres by a few percent. The notable exceptions were Whangarei, New Plymouth and Nelson ​where sales were well above the year before.”

Until October, sales volumes had been higher than in 2012, he said, but that changed when the LVR rules kicked in.

“The number of sales slowed down and the number of new listings followed suit. As yet there appears to have been no impact on values, although it is really too early to expect dramatic change,” he said.

He said the limits were likely to affect the market for the first half of the year.

“The impact of the speed limits is likely to differ across the country. Auckland values are expected to keep increasing throughout the year as both internal and external migration boosts the population while the supply of housing remains tight. This strong demand and low supply is likely to keep pushing values up, although the rate of increase will probably be less than the previous year.”

He said that in the last month or two of 2013 there were early signs that values in Christchurch and the surrounding areas may be faltering.

"In a few months from now we should be able to tell whether this was due to the LVR speed limits having a temporary influence, or whether values in Canterbury have reached their ceiling.”

He said: “Across the rest of the country it is likely that the LVR caps will have a downward impact on property turnover and values. Outside of Auckland and Canterbury there isn't the same imbalance between supply and demand. There generally aren't multiple purchasers vying for the same property, so the LVR speed limits are likely to significantly decrease demand and therefore prices.”

Ingerson said nationwide values were likely to increase only modestly this year, but that would probably be as a result of everywhere outside of Auckland slowing while the Auckland market continued to lift.

Increasing mortgage interest rates would also have an impact.

“Counter to these potential downward forces are increasing levels of business and consumer confidence, particularly in the big cities. Consumer confidence in particular is a strong driver of the property market.”

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