Active autumn market but values still dropping

Media release
8th April 2009

Embargoed to 11.59pm Wednesday, 8 April 2009

Active autumn market but values still dropping

QV's March statistics for the residential property market report a 9.3% decline in national property values over the past year (calculated using the QV index over the three months ending March 2009 in comparison to the same period last year), down further from the 8.9% decline reported last month. The average New Zealand sale price for March fell slightly to $378,399 and has now declined 2.7% over the past year. Average and median sales prices are not considered to be a reliable measure of change in property value, as both measures can be influenced by a change in the proportion of high or low value selling. The QV index is not affected by these changes in composition, and so represents a more reliable measure of property value.

“Our Valuers are reporting signs of increased buyer activity in the market, with more people attending open homes, and more sales occurring. This is a continuation of the increased activity in February, but also typical of March, which is traditionally the month when most sales occur” said Blue Hancock of QV Valuations.

“Our analysis shows that property values have dropped 9.3% over the last year, worse than last month. However, this further decline is being driven by falls across the Auckland region, particularly in Auckland City and Manukau. Many other areas of the country are beginning to see property values flattening, particularly in provincial cities and across parts of the Wellington area” said Mr Hancock.

“Despite signs of stability in property values across some areas of the country, there remains widespread uncertainty over what the coming months may bring. The number of sales traditionally drops during autumn and winter, but how interest rates impact market activity and the extent to which broader economic factors, in particular declining job security, will affect the property market remains unclear” said Hancock.

Property values across the Auckland area continue to decline further, and are now down 10.1% compared to twelve months ago. Tauranga at -8.7% and Christchurch at -9.7% have also slid back a little further. In contrast the year on year changes in Hamilton -9.3%, the Wellington area -8.7%, and Dunedin -8.8% have all improved.

There are recent signs of flattening property values in many provincial centres, and as a result Whangarei -12.1%, Rotorua -11.0%, New Plymouth -6.4%, Palmerston North -11.3% and Queenstown Lakes -7.9% are all showing similar levels to those reported last month. Gisborne has continued to slide back, with values now down 14.8% compared to the same time last year.

ENDS

Auckland

Property values in the Auckland region declined by 10.1% over the past year (calculated over the three months ending March 2009 in comparison to the same period last year), deteriorating further from the 9.4% annual decline reported in February. The average sale price for the region decreased from $502,193 to 495,892.

Glenda Whitehead of QV Valuations said; “Anecdotally we feel that values are beginning to stabilise or level off. Enquiry levels are up in most areas, with people now wanting to make decisions, which certainly didn’t seem like the case late last year. What are seen as low interest rates are definitely one of the drivers behind this, however caution remains due to wider economic factors such as job security”.

“Various real estate agents around the region are reporting that their stock levels are now low, having cleared old listings, and it seems that getting new listings is somewhat difficult. Perhaps low interest rates are making it easier for many to sustain their present situations, and maintain the status quo” Glenda said.

“Like last month, we have continued to have reports of strong activity at open homes. There are also multi-offers on quality property, and competitive bidding at particular auctions. This is all positive news after a long period of negativity. But winter will be telling; if listings are low, it could make for another slow season” Glenda said.

“Some investors are on the prowl again, but feedback indicates they are scoping the situation and only stepping in where the numbers stack up in their favour, or they can get a steal. We have seen an increase in clientele returning from overseas due to lack of jobs (UK, Europe, Australia), but it is hard to tell if these few represent a wider trend” Glenda said.

Hamilton

Property values in Hamilton declined by 9.3% over the past year (calculated over the three months ending March 2009 in comparison to the same period last year), improving on the 10.1% annual decline reported in February. The average sale price for the city increased slightly from $334,068 to $338,433.

Mr. Richard Allen of QV Valuations said; “There has been an easing in the downward trend in the year-on-year statistic for Hamilton City. Although the city experienced this slight improvement, the Central City/North West Hamilton areas continued to decline with values decreasing further from -10.8% in February to -10.9 % in March. Other areas around Hamilton were slightly more optimistic, with the South East moving from -10.4 % to -10.1%, the North East from -8.5% to -7.4% and the South West from -11.9 to -9.9%”.

“Even though interest rates are likely to continue to fall, there is some anecdotal evidence to suggest that sales volumes are up slightly and investors are starting to re-enter the market as residential yields improve. I feel that this slight improvement we are seeing currently in Hamilton City is likely to be an aberration, rather than the start of a new trend. A lack of demand and the economic recession will probably ensure that the residential property market in Hamilton remains relatively subdued for the rest of 2009” Mr. Allen said.

Tauranga

Property values in Tauranga declined by 8.7% over the past year (calculated over the three months ending March 2009 in comparison to the same period last year), down slightly on the 8.4% annual decline reported in February. The average sale price increased from $421,151 to $436,012, which reflects more activity in the upper end of the market, and is not necessarily an indication in an overall increase in value.

Mr. Shayne Donovan-Grammer of QV Valuations said; “There has been a dramatic increase in activity in the property market over the last month or so. This has been fuelled firstly by lowering interest rates, and recently by thoughts that 5-year fixed interest rates were going up. Changes in the interest rates (both down and up) have led buyers to be more decisive”.

“Vendors who have sat for months with little or no buyer interest have seized the opportunity that this more buoyant period presented and have met the market. While this activity surge is good news for property values, it has not yet stopped their gradual slide” Mr. Donovan-Grammer said.

Wellington

Property values in the Wellington region decreased by 8.7% over the past year (calculated over the three months ending March 2009 in comparison to the same period last year), an improvement on the 9.3% annual decline reported in February. The average sale price for the region decreased slightly from $433,339 to $429,848.

Mr. Kerry Buckeridge of QV Valuations said; “It certainly feels like there is a bit more of a buzz out there in Wellington’s property market. I have experienced a recent lift in the number of valuations I am completing, which is the result of an increase in activity since January. This increase in activity seems to be at the lower end of the market, which is consistent with the reduction in the average sales price. Some agents are indicating that most of their older listings are finally moving. In recent weeks some even seem to be scrambling for new residential investment stock, as some would-be sellers now appear to have held off for the relief lower interest rates are providing”.

“Although property values are still well down on a year ago, the figures are starting to point to a possible levelling-off of values. Time will tell whether we are near the bottom of this downturn, but for now we can be a little more optimistic. Investors are certainly looking around, although it is too soon to say that they are committing, especially since 5-year fixed term interest rates have risen. Some may see this as an opportunity to secure attractive yields before these long-term rates rise again. So anecdotal evidence and market sentiment back the possibility of a levelling market” Mr Buckeridge said.

“It is certainly still a buyers market with a price recovery not in sight at this stage. The increase in activity is typical of this time of year so we will have to wait and see what happens to sales volumes in the next few months. Fundamentally, job-security is still a big issue for many New Zealanders, so prices will have to remain subdued until general uncertainty in the wider economy abates” Mr Buckeridge said.

Christchurch

Property values in Christchurch decreased by 9.7% over the last year (calculated over the three months ending March 2009 in comparison to the same period last year), deteriorating further from the 9.1% annual decline reported in February. The average sale price for the city increased slightly from $344,816 to $349,442.

Melanie Holcroft of QV Valuations said; “The Central and Northern suburbs are holding as the strongest areas of Christchurch City, with the Eastern suburbs mirroring the Canterbury market. The Hill suburbs have decreased from -8.1% in February 2009 to -9.9% in March 2009. The upper end of the market seems to be experiencing less activity compared to the middle and lower sections”.

“Property values since December 2008 continue to decline, although this appears to be at a slowing rate. Whilst the average sale price for Christchurch City shows a small lift, it must be kept in context as this data is easily skewed by normal market fluctuations and the mix of property being sold” Ms. Holcroft said.

“The anecdotal signs of increased market activity with properties that are well priced continue on from last month, and buyers are showing plenty of interest in these. It should be noted however that the overall sentiment is still cautionary, with job security appearing to be the key driver affecting purchasing decisions. Local banks are also reporting a noticeable increase in pre-approvals, but this is still slow to filter through into market activity. We anticipate a slower market over the winter months, with current trends in line with seasonal behaviour” Ms. Holcroft said.

Dunedin

Dunedin’s residential property values decreased by 8.8% over the past year (calculated over the three months ending March 2009 in comparison to the same period last year), a slight improvement on the 9.4% annual decline reported in February. The average sale price in Dunedin remained relatively steady at $258,297.

Mr. David Paterson of QV Valuations said; “In previous months we have seen values in parts of the city declining at a faster rate than other areas. The year-on-year change this month is more evenly spread across all areas of the city. We are hearing mixed messages about the market at present. Some agents are reporting a significant improvement in demand and sales, while others are not quite so positive. This may just be a change in market share rather than any significant improvement in the market. Traditionally, sales pick up through the late summer and early autumn period and we are seeing a continuation of that trend, albeit to a lesser degree than in past years. The next two months running up to winter will provide us with a good indication of where we are heading. It will take sustained period of increased demand and sales before we are likely to see any improvement in the prices”.

“There are good opportunities available for first home buyers if they have the necessary deposit, and also for those wanting to upgrade to a more expensive home. With the reduced demand for higher priced properties, the price differential has moved closer in recent months” Mr. Paterson said.

“While these figures are showing a slight improvement on the previous month, it is too early to speculate that the market is picking up. We expect to see a continuation of same trend over the next few months. There will need to be some improvement in the economic outlook before we will see any significant change in the property market” Mr. Paterson said.

QV Residential Price Movement Report - As At March 2009 (PDF)

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