Shifting investor activity

There’s now clear evidence of changing investor behaviour in markets round the country – and yet values just keep rising, new QV data shows.

Tuesday, October 4th 2016, 12:44PM

by Miriam Bell

The Reserve Bank’s new investor-targeted LVRs appear to be leading to a shift in investor behaviour patterns.

Activity and demand in the hot markets of Auckland, Hamilton and Tauranga has slowed down, while Wellington’s market is booming, QV reports.

Despite these changes, property value growth in markets around the country remains strong.

QV’s September data shows the average national residential value rose to $619,660, from $612,527 in August.

This means the average national value increased by 4.9% over the past three months and by 14.3%, leaving it 49.5% above the 2007 market peak.

Once adjusted for inflation, the average national value went up by 13.8% year-on-year and are now 27.0% higher than in 2007.

The Auckland region’s average value rose by 5.8% over the past three months and by 15.0% year-on-year to hit $1,031,253.

This is 88.7% higher than the 2007 market peak – although, once adjusted for inflation, the average value was up 14.5% year-on-year and and are 60.2% higher than in 2007.

However, QV national spokesperson Andrea Rush said these values rises were eclipsed by those in Wellington.

“The Wellington market continues to show strong levels of activity and demand.

“Values in the capital have risen faster than the Auckland region over the past three months and year on year.”

The Wellington region’s average value is now $553,023.

This means the average Wellington value rose by 7.1% over the past three months and by 21.2% year-on-year, leaving it 21.4% above the 2007 market peak.

QV’s Wellington spokesperson David Nagel said strong value growth across the Wellington region is being driven by high demand and a shortage of supply.

“The strongest demand is at the low end of the market and it appears first home buyers are now missing out to investors as they compete for entry level properties.”

The latest CoreLogic buyer classification data confirms an increase in sales to investors in the Wellington market, Nagel said.

“Investor housing stock has become really scarce and we are seeing big numbers vying for limited stock at auctions.

“We are also seeing high clearance rates at auctions and buyers are acting on a fear of missing out and stretching their budgets in order to secure properties.”

Meanwhile, the situation is different in the Auckland, Hamilton and Tauranga markets.

Rush said there has been a clear slowing in activity and demand in these markets since the introduction of the new LVR rules.

QV is seeing a stabilisation of prices in parts of Auckland, along with a shift in demand from the investor housing stock to properties with higher density development potential, she said.

“This suggests some buyers may be getting the message that upward growth around existing town centres will eventually happen under the new Unitary Plan.”

QV’s Hamilton and Tauranga valuers said these markets had seen a decrease in activity and demand, along with a noticeable decline in investor activity.

However, both said that activity and demand in surrounding regional towns had not been impacted on by the new LVRs.

In other parts of the country, markets also remain in good health with strong value growth, according to QV.

Rush said the Dunedin market remains buoyant and values there continue to rise steadily with Auckland investors having an increasing presence.

“The Christchurch market remains relatively stable in terms of value growth, while Queenstown Lakes District has seen the highest annual rate of value growth of anywhere in the country (up 30.7%).”

She said many regional centres around the country also continue to experience strong value growth – with Rotorua, Whangarei, Napier, and Nelson being some of the stand-out performers.

“Centres with entry level properties under $350,000 appear less impacted by the new LVR restrictions, most likely due to the fact the new 40% deposit requirement for investment properties is easier to achieve at a lower price point.”

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