House price growth has slowed across 14 out of 16 New Zealand cities over the last two months, a property price report shows.
Quotable Value (QV) house price index data for May shows that over the last three months to May, the national average house price increased by 2.4 percent to $739,539. The growth rate is down from 3 percent in April. The year-on-year increase of 7.7 percent is also below the growth rate of the previous month.
QV general manager David Nagel, said that an initial bounce in sales volumes after lockdown was a likely result of pent-up demand. Although COVID-19 restrictions have eased under alert level 2, numbers are down and buyers are cautious, the effects of which aren't yet captured in the data.
"The key point from the QV house price data this month is the gradual decline in quarterly growth in May, with 14 of the 16 major cities we monitor showing a reduction in the rate of growth since April."
"This trend is likely to continue as a greater proportion of post-lockdown sales are used in the HPI calculations," Nagel said.
He said the number of sales during April and May were well below normal levels, skewing the pricing data towards early to mid-March, when volumes were higher. A disconnect in price expectations between sellers and buyers suggests the industry is "on the brink of a material decline" similar to the 10 percent fall following the 2008 Global Financial Crisis (GFC).
"When we look at the April and May transactions in isolation, it shows a definite impact, with post lockdown sales on average down by around 5 percent on pre-lockdown levels," Nagel said.
"While the data is still sketchy, we're now very confident that the market has come back already from the value levels we saw in February and March, particularly in some of the high-risk locations that had previously experienced a sustained period of value growth."
Although demand for affordable properties in central locations is still strong, the number of for sale signs is expected to increase. The percentage drop in property prices will be clearer over the next few months.
"We'll likely see more listings gradually coming on stream after the cushioning effect of the Government wage subsidy comes to an end and bank mortgage holiday periods expire.
"Unfortunately, this will be when the full impact of the pandemic will be reflected on real estate values", Nagel added.
Auckland house prices up 5.4 percent year-on-year, North Shore the highest
In the Auckland area, the average house is valued at $1,086,223, an increase of 5.4 percent year on year and 2.7 percent over the last quarter.
Auckland's North Shore had the highest annual growth of 6.6 percent, followed by Auckland City at 6.2 percent and Waitakere at 5.5 percent.
Quarterly growth figures to May show that properties on the North Shore increased by 3.6 percent, followed by Waitakere at 3 percent. Properties in Manukau increased by 2.7 percent and Papakura by 1 percent.
QV senior consultant Rupert Yortt said that May values were relatively flat. Lower value and centrally-located homes still received strong interest. Overall, buyers were cautious.
"First and second home buyers who had little disruption with their employment during the lockdown period are still actively looking, while higher value properties are tending to receive lower levels of interest," Yortt said, adding that well-presented, centrally located homes were the exception.
"Buyers are being cautious with off the plans purchases and smaller development plans throughout the region are likely to be put on hold in the current uncertain climate."
Wellington house prices up 7.9 percent year-on-year, Hutt City the highest
In Wellington, the average house is valued at $894,710 ($787,288 including Hutt Valley, Porirua and Kapiti), an increase of 7.9 percent year on year and 0.7 percent over the last quarter.
Hutt City had the highest annual growth of 17.7 percent (3.2 percent increase in the last quarter), to $688,394. Close behind were Upper Hutt and Porirua, with annual growth rate increases of 13.5 percent and 16.7 percent to $633,343 and $692,264 respectively.
QV senior consultant David Cornford, said that growth in the Wellington region had plateaued, but there's currently no evidence to suggest that values have dropped.
"Open homes have been well attended and multiple offers are still common for well-presented properties in desirable locations, Cornford said.
However, there was a slight increase in the number of properties not selling at tender, indicating a disconnect in price expectations. However, the current listings shortage and high number of Government employees is expected to support stable prices.
"Attractive interest rates have peaked the interest of first home buyers who have job security and this segment of the market appears to be holding up well."
Christchurch house prices show modest growth
In Christchurch, the average house is valued at $517,376, an increase of 3.7 percent year on year and 1 percent over the last quarter.
QV senior consultant Kris Rogers, said that the market had been active, with strong demand in the $300,000 to $550,000 price-range.
"Real estate agents have reported good numbers attending open homes in this value range with first home buyers prevalent, being encouraged to the market by record low interest rates and continued affordability."
Palmerston North, Whanganui, Clutha show strong annual growth
Palmerston North property values grew by 415.3 percent year-on-year and by 1.8 percent over the last quarter. Other regions with strong year-on-year growth were Dunedin (21.1 percent), Invercargill (16.8 percent), New Plymouth (9.7 percent) and Rotorua (9 percent).
In North Island provincial centres, Whanganui grew by 25 percent year-on-year and in the South Island, Clutha grew by 26.8 percent year-on-year.
Quarterly growth figures were relatively flat, with the highest in Hastings (4.6 percent), Whangarei (4.4 percent), Napier (4.1 percent) and Dunedin (4.2 percent). In the North Island, South Waikato was up 15.8 percent in the last quarter. In the South Island, Clutha was up 13.5 percent.
With unemployment and the number of property listings tipped to increase, combined with record low interest rates, the odds are increasingly stacked in favour of property buyers.