Growth in the national average property value dropped slightly in May, according to the latest CoreLogic House Price Index (HPI); a slowdown which is being attributed to the Government's recent housing announcements.
But it hasn't stopped Wellington's average value ticking past the $1 million mark, up 3.1 percent over the month to $1,001,732, according to the HPI. It joins Auckland in the million-dollar club, with the City of Sails up 1.4 percent in May to $1,265,071.
Nationally, the HPI shows the average property value increased by 2.2 percent hitting $890,848. That's down on the 3.1 percent growth recorded in April.
Nick Goodall, CoreLogic's head of research, says the slowdown shows buyers are adjusting to the Government's recent housing announcements as well as the Reserve Bank's tightening of lending criteria.
"This reflects the impact of both the tightened loan-to-value ratio (LVR) restrictions, imposed by the RBNZ, as well as the March 23 housing policy announcement from the Government, phasing out the ability for property investors to deduct their interest expenses from their end-of-year tax returns," he says.
"While these changes have caused some investors to sit back and take stock of their portfolio, it appears this pull-back in demand has been mostly made up for by other investors, likely with less debt, and owner-occupiers who had previously missed out while competing in a very heated market."
Goodall says the data also supports recent forecasts of a significant reduction in growth over the coming months. In last month's Budget Economic and Fiscal Update, Treasury said annual house price growth is likely to peak at 17.3 percent in June before easing to 0.9 percent by June next year.
According to the HPI, the annual rate of growth to May sat at 20.5 percent, up from 18.4 percent in April. However, CoreLogic notes that's impacted by the housing market stalling last year during the COVID-19 lockdown.
"When investor LVR restrictions were adjusted in October 2016 (requiring a 40 percent deposit for investors) the rate of quarterly value growth reduced almost immediately, from 5.1 percent at the end of September 2016 to 1.2 percent at the end of March 2017 and 0.3 percent by September 2017," he says.
"This time around there are additional factors at play, including changes to interest deductibility for investors buying an established property and a reduction in demand as affordability constraints become more challenging. The aggregate effect of these changes is likely to result in a further slowdown in the pace of house price appreciation."
He also buyers are facing a changing environment when it comes to interest rate outlook.
"As the RBNZ forecast in their latest Monetary Policy Statement, the next move for the Official Cash Rate (OCR) is expected to be up, albeit in at least a years’ time, but this is likely to weigh on buyer attitudes with regards to taking on large sums of debt. Bank serviceability tests (at higher interest rates) do provide a form of cover for this, however."
Across the main centres, Tauranga had the greatest growth in May, up 5.1 percent. It's now just under $1 million at $968,342.
"However, it’s worth noting the recent volatility in the monthly data," CoreLogic says.
"The index recorded a -1.5 percent drop in February after 6.8 percent growth in December. This leads us to pay more attention to the quarterly change, which in this case is a still-very-strong 10.6 percent - similar to both Hamilton (10.4 percent) and Wellington area (10.8 percent)."
CoreLogic also notes that tourism hubs Queenstown and Rotorua saw the greatest monthly growth amongst the provincial centres, both jumping 3.9 percent in May.
It says that's "a continuation of recent strength as the economic confidence for these centres improves, helped out by the opening of the trans-Tasman bubble as well as the $200m tourism package announced by Tourism Minister Stuart Nash.
"Meanwhile, property values in our easternmost city of Gisborne have seen a continuation of its recent strong momentum, with the annual rate of growth hitting 36 percent - the strongest rate in over 15 years."