QV statistics confirm slowing property market

Media release
9 November 2007
QV statistics confirm slowing property market

QV's October statistics released today report growth in national property values of 12.7% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year). This has eased from 13.2% reported in September and is the second month the rate of increase has dropped. The average sale price for New Zealand residential properties increased slightly to $406,176.

"The effect of higher interest rates and lessening buyer confidence is now reflected in a general slowdown in market activity and a shift from a sellers market towards a buyers market" said QV spokesperson Blue Hancock. "Recent market indicators confirm that many people do not believe it is the right time to buy" said Mr Hancock.

"Purchasers are being careful and taking a longer time to buy property. Developers and investors are also acting cautiously and seem willing to wait for further market signs to appear. Activity is patchy across a number of regions including the main urban centres. All predictions are for a gradual easing in the market overall, with the pace of any slowdown determined by the spring and summer activity" said Mr Hancock.

All the main urban centres, except Hamilton, reported easing growth in property values. Auckland City decreased to 11.9% (12.1% last month). Wellington City property values dropped to 13.7% (down from 14.1% reported last month), Christchurch eased to 12.3% from 13.1% and Dunedin slowed to 9.4% from 10.4%. Hamilton increased to 15.8% from 14.4% last month.

Most of the provincial centres also reported flattening property values. Gisborne’s recent strong growth eased to 20.4% from 21.8% last month. Tauranga dropped to 7.7%, Palmerston North to 12.4%, Nelson to 12.9%, and New Plymouth was flat at 9.8%. However, some provincial centres continued to increase. Napier’s growth in values leapt to 7.2% from 4.9% reported last month, and Queenstown and Invercargill both continued their strong growth, increasing from 10.8% to 13.7%, and 34.6% to 36.4% respectively.

Main Urban Areas Commentary:

Auckland:
Property values in the Auckland region increased by 12.8% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year). The average sale price for the region was $524,180.

"Like the weather, activity in the Auckland property market has been patchy and dull. The statistics reflect the activity and results of recent months, with a general easing in property value growth rates across Auckland" said Glenda Whitehead of QV Valuations. "Furthermore, even though growth rates are down on those reported last month, they are still firmly in the positive territory, with all cities and regions still recording year on year growth in excess of 10%".

"With the exception of Rodney, the other Auckland areas showed a general easing in the average sales prices, which is typically reflective of more activity within the lower end of the market" said Whitehead. "Properties appear to be taking longer to sell, even in hot spots close to the city such as Sandringham, Kingsland and Western Springs".

"Our valuers are hearing reports that developers are stepping away from infill housing developments as Council costs and time delays associated with getting Titles, squeeze profit margins" said Whitehead.

"While remaining quieter than previous years, there has been a noticeable pickup in activity over the last month, perhaps spring is just slow to come and not quite so colourful this year" said Whitehead.

Hamilton:
Hamilton’s property values increased by 15.8% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year). The average sale price for the city increased to $368,194 (from $365,515 last month).

"Although sales volume and activity continued to decline in Hamilton, in part due to increasing interest rates and decreasing immigration, residential property values for the city increased to 15.8% from 14.4% in September" said Richard Allen of QV Valuations.

Of the main urban centres, Hamilton was the only one that showed a higher year on year rate of growth this month. "There is continued growth in North East Hamilton, which grew from 15.9% in September to 16.6% in October. There also appears to be large one-off increases in the Central City and North West areas of Hamilton, which increased from 11.1 % in September to 15.4% in October, and South West Hamilton which went from 10.4% last month to 15.4% this month" said Mr Allen.

"Although demand softened in most areas of the city it did not have a negative influence on the average sale price in Hamilton, which increased for the fifth consecutive month from $365,515 to $368,194" said Mr Allen. "The residential property market in Hamilton continues to exhibit some durability, but the full impact of recent sales trends is likely to be realised in coming months".

Tauranga:
Tauranga property values grew 7.7% (calculated over the three months ending October 2007 in comparison to the same period last year). The growth rate is down slightly on the 8.2 % reported for September.

"The Tauranga property market continues to be somewhat flat with relatively minor increases in property values over the past 6 months" said Christopher Boyd of QV Valuations. "There was an improvement in the average sale price from $438,703 last month to $450,122 this month".

"Anecdotal evidence suggests that selling timeframes are longer and an increasing number of bargain house hunters are making low offers. Agents also report increased difficulty in closing deals with a widening gap between seller expectations and the offers on the table" said Mr Boyd.

Wellington:
Property values in the Wellington region increased by 15.9% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year), down from 16.3% reported last month. The average sale price for the region was $438,263.

"The trend towards lower price increases is now more evident and consistent with declining activity and increasing selling times" said Max Meyers of QV Valuations.

"Across the region the increase in property values has eased slightly, with the exception of Wellington City's Western suburbs which increased to 17% from 14.8% last month" said Mr Meyers. "The highest average sales price is also recorded in the Western Suburbs at $575,688 (last month $564,537) an area that has not seen the same decline in activity as other parts of Wellington" said Mr Meyers.

"The Hutt Valley continues to outperform the rest of the region and records the highest value increases with Lower Hutt at 19.9% (20.4% last month) and Upper Hutt at 19.8% (20.3% last month)" said Mr Meyers.

"The market should settle back to a more modest rate of price increase. Central locations still have good demand from buyers, in contrast to areas on the edge of the main city areas" said Mr Meyers.

Christchurch:
Property values in Christchurch increased by 12.3% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year) down from 13.1% reported last month and 14.1% recorded prior to that. The average sale price for the city was $365,152.

"The annual price movements continue to ease back, while the average sales price remains fairly static. There is now good evidence of a softening market with lower sale volumes, lengthening sale periods, and pricing pressures evident. Lengthening sale periods is especially noticeable in the upper price brackets" said Mark Dow of QV Valuations.

"Our valuers have noted caution from some developers and investors who are holding off purchasing properties as they wait to see what the market will do. This caution is also evident with the general buying public as they take longer to make a purchasing decision. This has resulted in a fairly patchy market and one which has swung towards a buyers market. It is increasingly important for properties to be well priced to attract a purchaser’s attention" said Mr Dow.

"The market in the provincial centres is also generally down, with Selwyn, Waimakariri, Ashburton and Timaru all recording lower annual growth rates from last month, while Hurunui, and Banks Peninsula had improving annual growth" said Mr Dow.

Dunedin:
Dunedin’s residential property values increased by 9.4% over the past year (calculated over the three months ending October 2007 in comparison to the same period last year), down from 10.4 % reported last month. Over this period, the average sale price in Dunedin was $272,460.

"The current trend is very similar to that experienced last year, where value growth eased from September to November before increasing again in the early part of 2007" said David Paterson of QV Valuations.

"Our valuers have reported a significant drop in inquiry compared with the same period last year. There is a feeling that the high interest rates along with significant increases in prices for fuel, food and other essential items is making purchasers far more cautious in their purchase options in relation to property" said Mr Paterson.

"We've noticed a significant increase in listings, which would indicate that the supply/demand equilibrium has changed more to the buyers favour. A continuation of this trend will see a continued easing in QV’s value growth index" said Mr Paterson.

"Agents are reporting a positive outlook with increasing interest at open homes and an increased number of listings, however at this stage it has not resulted in an increase in the number of sales. Whether this positive outlook will result in an increase in sales activity is yet to be seen. We certainly have not seen the spring flush that is usual in this market" said Mr Paterson.

Notes on the above data:

If a City or Region is shown in italics with an * this indicates the values for this area may not be statistically accurate as they are based on a low volume of sales.
N/A - indicates that either there were too few sales to report a Property Value Growth % or that the data for this period was unavailable

The information included in the above table is calculated based on the sales data entered into QV's system for the previous 3 month period. For example, information for the period ending June will be calculated based on sales entered between April 1 and June 30.

Property Value Growth is the annual % change in residential property values, calculated using QV's House Price Index methodology. The residential sales entered into QV's system for the previous 3 month period are compared to the same period of the previous year to identify the annual percentage change in residential property values. Average sale prices are calculated based on residential sales entered into QV's system for the previous 3 month period.

Residential Price Movement
Questions and Answers:
The following information is provided as background to the Residential Price Movement statistics.

1. What is the Residential Price Movement Report?

The Residential Price Movement Report is a new set of residential property statistics that provides an estimate of the change in residential property values over the previous 12 months for areas throughout New Zealand. Residential sales compiled by QV for the previous 3 months are compared to the same period of the previous year to identify the annual percentage change in residential property values. The residential sales included are for residential houses, apartments, flats, home and income properties, and houses converted to flats.

2. Why has the Residential Price Movement Report been developed?

The Residential Price Movement Report has been developed to provide a timely indicator of residential property value movement, using the latest residential sales data compiled by QV for the previous 3 month period.

QV has previously only released property statistics quarterly. QV’s measure of price movement has been the Quarterly House Price Index (QHPI). The QHPI only includes sales that have been notified to the Territorial Authority that sold within the quarter. As sales of properties can sometimes take 4-6 weeks to settle, the QHPI is released after an extended period to incorporate as much sales activity from the quarter, which results in increased statistical accuracy, but also a less timely output.

As the Residential Price Movement Report uses the sales compiled by QV over a 3 month period, rather than the sales that necessarily sold within that period, the Residential Price Movement Report can be released on a more frequent basis, providing a timelier indicator of property value movement. The Residential Price Movement Report also includes sales activity in other residential property sectors including apartments and flats.

3. How frequently will the Residential Price Movement Report be released?

The Residential Price Movement Report data will be available to the media on a monthly basis. It will be released to the media for publication on either the second or third Monday of each month.

4. How current is the Residential Price Movement data?

The data contained in the Residential Price Movement Report is based on the residential sales compiled by QV for the previous 3 month period.

For example, the Residential Price Movement Report as at January 2005 will include sales compiled by QV up until 31 January 2005 and include sales compiled since 1 November 2004.

5. Why does the Residential Price Movement Report include sales compiled by QV over a 3 month period?

Sales are included over a 3 month period rather than a single month to ensure that there are sufficient sales volumes to calculate statistically accurate property value growth.

6. How is the Residential Price Movement data calculated?

The Residential Price Movement Report includes two indicators of property value; the property value growth, and average sales prices.

Property Value Growth
The Property Value Growth uses QV’s House Price Index methodology, which generates a residential index for each area by recognising the sales price of each property sold compared to its capital value. This ensures the index provides a measure of change in property values, without fluctuations caused by higher sales volumes in one or more property sectors (e.g. high volumes of apartment sales or investment properties).

Residential sales compiled by QV for the previous 3 month period are compared to the sales compiled by QV for the same period the previous year to identify the annual percentage change in property values.

Average Sales Prices
The Average Sales Prices calculated in the Residential Price Movement Report are based on residential sales compiled by QV for the previous 3 month period.

7. Does property value growth reflect a change in average sales prices?

No. Property Value Growth does not reflect a change in average sales prices, which are only given to enable a comparison of sale prices for one month compared to the last. Property Value Growth uses QV’s House Price Index methodology to generate a residential index for each area by recognising the sales price of each property sold compared to its capital value.

8. Why does QV recommend using the Property Value Growth rather than Average Sales Prices to verify the change in property values over time?

Average Sales Prices are only provided in the Residential Price Movement Report as a broad indicator of property values in an area to assist comparisons between areas. QV recommends referring to the property value growth to verify change in property values over time, rather than the average sales price, as the average sales prices can be impacted by the types and categories of properties selling, or low volumes of property sales.

9.
When was the Residential Price Movement Report first released?

The Residential Price Movement Report was first released for the period ending January 31 2005. The QV Quarterly House Price Index, which measures the movement of house values over time, is available back until 1989. QV is also able to produce statistics using its database going back to 1985 for most areas.

10. Why does the Residential Price Movement Report provide an ‘estimate of property value’ only?

Data in the Residential Price Movement Report provides estimates only of property value, and should not be considered ‘final’ statistics, as not all sales for the 3 month period will be included due to the time the data is released. This is because some sales within the 3 month period will not have been notified to the Territorial Authority in time for inclusion in the Residential Price Movement Report data. Notification of the sale to the Territorial Authority does not occur until after the sale has been settled and documents forwarded by the solicitor. This generally introduces a lag of 4 to 6 weeks before the Territorial Authority records the sale.

QV produces final property statistics which are released after an extended period to incorporate a greater level of sales activity, resulting in a more statistically accurate output. Final property statistics, including the QV Quarterly House Price Index, can be purchased online at www.qv.co.nz.

11. Why do some Territorial Authorities show ‘N/A’ (Not Available)?

Territorial authorities may show ‘N/A’ if there is insufficient data available at the time of publication to produce statistically accurate outputs. This may occur when there has been very low sales activity in an area, or alternatively when QV has not been supplied sufficient residential sales volumes by a Territorial Authority for a particular period.

12. Why does QV caution against using statistics with low volumes of sales?

Statistics based on low sales volumes should be used with caution, as low volumes of sales are insufficient to create statistically accurate outputs. Any statistics calculated based on sales volumes of less than 50 sales appear in Italics in the Residential Price Movement Report data.

13. How are the regions and city areas defined?

Property Value Growth statistics are provided for each council area throughout New Zealand. Five main urban areas (Auckland, Hamilton, Wellington, Christchurch, and Dunedin) also have property value growth statistics available for areas within the cities. These city areas have been defined through consultation with QV Valuers that have local knowledge of each area.

Property Value Growth Statistics are not provided for individual suburbs, as most suburbs have insufficient sales volumes to ensure statistically accurate property value growth calculations.

14. Where does QV source the property data?

QV maintains a national database on Property Information that it creates by sourcing updates of the District Valuation Roll from all NZ Territorial Local Authorities/councils.

ENDS

© Scoop Media