Auckland is amongst the most vulnerable regions of the country when it comes to the risk of property prices falling, according to a new analysis.
CoreLogic on Tuesday released its new Property Vulnerable Index which looks at "how an economic downturn or change in market conditions may impact property in different parts of the country".
"There are a broad range of factors which will influence the future performance of the property market and these will vary in their relevance from region to region," said head of research Nick Goodall.
"The results show many of the country's most vulnerable markets are smaller centres located in the central North Island. The upper South Island and Canterbury regions look less vulnerable than most of the rest of the country."
Values have skyrocketed in the past 18 months, with record-low interest rates and economic uncertainty driving investors and speculators towards the property market. CoreLogic's figures show in the past year they've gone up 27.8 percent nationwide.
"Of course, nothing can go up forever and the already stretched position for housing affordability across New Zealand has further deteriorated in the past year," said Goodall.
CoreLogic looked at six different measures - demand for property, housing affordability, the local economy and employment figures, recent credit behaviour, the balance of supply and demand and investor activity - in each region, concluding the most at-risk of a downturn were Otorohanga, Ruapehu and the MacKenzie region.
Otorohanga's median price according to RIENZ has gone from $277,000 to $454,000 in just three years, and according to CoreLogic is also seeing reducing demand, high financial hardship and a growing number of people falling into arrears in paying off their debts. The MacKenzie economy was hit hard by COVID-19, with tourism drying up - there's also a high number of people falling into arrears on their mortgages and plenty of homes up for sale, CoreLogic said.
Other small markets at risk of seeing property value growth stall or turn negative include Kaipara, Kawerau, Opotiki, Clutha, Tararua and Hurunui.
Of the big centres, Auckland had the highest risk and Christchurch the least. The latter has "very favourable" affordability compared to the rest of the country, and low supply plus high demand keeping prices rising. Auckland on the other hand has high levels of investor activity, who are likely to be hit hard as interest rates rise, with many of them paying interest-only mortgages. There's also falling demand, "probably affected by extended lockdown".
Markets considered low-risk for a fall include Whakatane, Hastings, Tauranga, Manawatu, Marlborough, Waimakariri, Wellington and Timaru.
"There are a broad range of factors which will influence the future performance of the property market and these will vary in their relevance from region to region," said Goodall.
"The results show many of the country's most vulnerable markets are smaller centres located in the central North Island. The upper South Island and Canterbury regions look less vulnerable than most of the rest of the country.
"It's also important to note the areas expected to underperform may not necessarily see values fall; but in relative terms they face the greatest economic risks which makes them more vulnerable to a downturn."
More can be read on the CoreLogic website.