Property market continues to slow

Media release
8 February 2008

Embargoed to 11.59pm Sunday, 10 February 2008

Property market continues to slow

QV's January statistics for the residential property market report a 8.9% growth in national property values over the past year (calculated over the three months ending January 2008 in comparison to the same period last year), down on the 10.0% growth reported in December 2007. The average New Zealand sale price increased to $390,636 this month (from $388,253 last month).

"Even though year on year growth is still positive it has slowed rapidly. This reflects the easing market of the last few months compared to the buoyancy of last spring and summer. If the easing continues we would expect to see growth flatten to the point where there is no annual gain in value. Preliminary analysis carried out by QV suggests that over the past three months there are many areas across the country where the growth in property values is static" said QV spokesperson Blue Hancock.

"There are increasing reports from our valuers of properties going to mortgagee sale, with the number of these sales likely to increase as the year progresses. Higher mortgage interest rates are affecting property owners on low discretionary incomes. Also affected are those who have highly geared investment property portfolios as they come off fixed term mortgages and have to re-negotiate at much higher interest rate levels" said Mr Hancock.

All the major cities recorded easing growth in property values, with Wellington recording the highest annual growth of 10.6%, down from 11.4% last month. Auckland City eased to 7.9% from 9.1%, Hamilton dropped significantly from 11.8% to 8.3%, Christchurch slowed from 8.2% to 6.9%. Dunedin dropped from 6.9% to 6.1%, and Tauranga also decreased from 5.0% to 3.4%.

Growth in property values eased across all the main provincial centres. Queenstown's growth rate rapidly slid to 6.7% (last month 12.7%). Wanganui and Palmerston North dropped 0.8% to 7.4% and 7.6% respectively. Gisborne 5.5%, Invercargill 25.9% and Nelson 7.9%. Whangarei 7.9%, Rotorua 9.1%, and New Plymouth 2.9% all reported easing annual property value growth.

ENDS

Main Urban Areas Commentary:

Auckland:
Property values in the Auckland region increased by 9.6% over the past year (calculated over the three months ending January 2008 in comparison to the same period last year). The average sale price for the region was $507,728, down on $511,188 recorded last month.

"With such a brilliant summer being dished up, there seems to be little focus on the property market in Auckland at present. The predicted easing in growth rates continues in all areas of greater Auckland with the exception of Franklin" said Glenda Whitehead of QV Valuations.

"Average sale prices have varied on levels reported last month to varying degrees. Overall activity has been sluggish, with those properties on the market sitting longer than what we have been used to" said Whitehead.

"Our valuers report that the sales taking place are those with realistic asking prices. Sales by auction have reduced and tend to be for more premium properties. The number of properties actually on the market seems to be growing after a period of low levels of listings and low numbers of sales. Overall it's been a quiet market during the holiday period with buyers remaining cautious" said Whitehead.

Hamilton:
Property values in Hamilton increased by 8.3% over the past year (calculated over the three months ending January 2008 in comparison to the same period last year). The average sale price for the city was $363,261 down from $364,013 in December 2007.

"This is now the third consecutive month where Hamilton residential property growth has slowed. All four quarters of the city have seen significant declines in property value growth. The Central City/North West quarter has been significantly impacted. Growth has fallen by 4.1% from 10.5% in December 2007 to 6.4% in January 2008. The total number of sales is significantly down from this time last year, a good indication of reduced confidence in the residential property market" said Greg Petersen of QV Valuations.

"Real estate agents appear to have plenty of listings, although anecdotal evidence suggests that properties are staying on the market longer. The limited number of buyers in the market are able to be more discerning before purchasing. This is probably most true of Hamilton’s North East quarter where the average sale price has dropped by $14,262 to $436,192, the second major decrease for this area in the last couple of months" said Mr Petersen.

"As the cumulative effects of higher interest rates, and higher grocery and fuel prices take their toll on the weekly budget, demand for residential property has eased back and it is clear that we are now in a buyers market" said Mr Petersen.

Tauranga:
Property values in Tauranga City increased by 3.4% (calculated over the three months ending January 2008 in comparison to the same period last year), down on the 5.0% reported for December 2007. The average sale price for the city was $444,022, which remains more or less unchanged on last month's figure of $443,399.

"In the Western Bay of Plenty district the rate of property value increase for January is 0.3%, down from 1.8% for December. The average sale price for properties sold in the Western Bay of Plenty district for January is $471,716" said Russell Oliver of QV Valuations.

"The property market in the Tauranga region continues to be quiet. The rate of increase in property values in both Tauranga City and the Western Bay of Plenty district has been steadily tracking downwards since September 2007" said Mr Oliver.

Wellington:
Property values in the Wellington region increased by 11.0% over the past year (calculated over the three months ending January 2008 in comparison to the same period last year), down from 12.1% reported last month. The average sale price for the region increased from $438,416 last month to $445,859 this month.

"Property value growth in the Wellington area is easing back steadily, but remains at historically high levels. Most areas are now heading back to pre-2006 levels when a 10.0% year on year increase was rare. The region is now at 11.0% and trending down. This is expected to continue for a few more months yet as the number of sales is noticeably lower and selling times are increasing, signalling a shift from a sellers market to a buyers market" said Max Meyers of QV Valuations.

"All areas are showing lower percentage increases. The biggest increase in value growth was in Upper Hutt at 13.0%, down from a maximum of 21.0% last year. The lowest increase was 10.2% in the North Wellington area and represents the lowest year on year growth since February 2005" said Mr Meyers.

"Average prices have increased in some areas with the Eastern suburbs showing the largest increase of $32,295 to $567,336. Wellington City and Southern suburbs showed a decline of $6,848. The Western Suburbs showing the highest average price of $590,914 some $75,000 higher than the same time last year" said Mr Meyers.


Christchurch:
Property values in Christchurch increased by 6.9% over the past year (calculated over the three months ending January 2008 in comparison to the same period last year) down from 8.2% reported last month and 9.9% recorded in November. The average sale price for the city increased by $5,769 to $367,681 from $361,912 reported in December 2007.

"Economic factors are still working against the housing market and this is reflected in another month of easing growth rates" said Richard Kolff of QV Valuations.

"Sustained pressures such as high fuel and food prices and the Reserve Bank holding up the Official Cash Rate are resulting in a slowdown. The fact that we are still seeing an annual growth rate locally ranging from 6.9% in Christchurch to 13.5% in Ashburton shows the underlying strength of the property market. However this is being tested as buyers respond to changing market expectations and negotiate a lot harder with vendors" said Mr Kolff.

"Property owners that have low discretionary income, or who have highly geared investment property portfolios, are struggling as they come off a fixed term and have to re-negotiate to a much higher mortgage interest rate. Already this month we have seen some properties go to mortgagee sale and this is likely to become more prevalent as the year progresses" said Mr Kolff.

"Areas topping the annual growth rate charts are Banks Peninsula on 12.8% and Hurunui on 12.4% (both on a low turnover of sales), those at the lower end were the Christchurch Eastern and Hill suburbs with 6.9% and 7.3% respectively" said Mr Kolff.

Dunedin:
Dunedin’s residential property values increased by 6.1% over the past year (calculated over the three months ending January 2008 in comparison to the same period last year), down from 6.9 % reported last month. The average sale price in Dunedin was $279,358.

"Growth is reasonably consistent across the city with value growth continuing to level off and following a trend that started in August last year. With this expected downward trend forecast since the interest rate rises in the early part of last year. Price increases for food, fuel and other necessities have put further pressure on home affordability" said David Paterson of QV Valuations.

"The number of property listings continues to grow; as a result there is a lot more choice for buyers. Demand continues to ease with agents reporting that the market is now in the buyers favour. There is a feeling that these conditions will result in a market correction of value levels in the months ahead" said Mr Paterson.

QV RESIDENTIAL PRICE MOVEMENT REPORT - as at January 2008
/ / /
City/Region
/ January 2008 Property Value Growth %
/ December 2007 Property Value Growth (%)
/ January 2008 Average sale price
/ (Annual % Change) / (Annual % Change) / ($)
Far North / 11.4 / 3.2 / 372,238
Whangarei / 7.9 / 10.7 / 350,839
Kaipara / 10.7 / 13.9 / 306,096
Rodney / 11.4 / 12.4 / 556,479
- Hibiscus Coast / 8.7 / 10.2 / 565,481
- Rodney (North) / 15.2 / 15.3 / 542,916
North Shore (A) # / 11.1 / 11.8 / 580,631
Coastal North Shore / 10.9 / 11.7 / 654,610
North Shore Onewa / 10.7 / 11.5 / 469,020
North Harbour / 13.2 / 14.1 / 620,389
Waitakere (A) # / 10.7 / 12.3 / 401,649
Auckland (A) # / 7.9 / 9.1 / 580,206
- Auckland City (Central) / 3.4 / 5.1 / 516,792
- Auckland City (East) / 9.1 / 10.2 / 719,645
- Auckland City (South) / 9.8 / 11 / 513,602
- Islands / 13.3 / 11.9 / 647,834
Manukau (A) # / 11.3 / 12.6 / 442,414
- Manukau East / 12.5 / 14.1 / 565,013
- Manukau Central / 12 / 13.7 / 360,852
- Manukau North West / 10 / 11 / 391,990
Papakura (A) # / 8.8 / 10.3 / 352,847
Franklin / 9.2 / 8.4 / 394,601
Thames Coromandel* / 5.7 / N/A / 432,200
Hauraki* / N/A / N/A / 294,795
Waikato / 10.6 / 14 / 273,159
Matamata Piako / 9.6 / 10.2 / 296,950
Hamilton # / 8.3 / 11.8 / 363,261
- Hamilton North East / 10 / 12.8 / 436,192
- Central City/North West / 6.4 / 10.5 / 336,121
- Hamilton South East / 7.3 / 10.8 / 338,565
- Hamilton South West / 8 / 10.9 / 340,132
Waipa / 6.5 / 7.8 / 338,145
Otorohanga* / -4.4 / -5 / 241,583
South Waikato / 20.4 / 19.2 / 149,362
Waitomo* / 13.5 / 17.6 / 166,601
Taupo / 1.3 / 0.8 / 383,183
Western BOP / 0.3 / 1.8 / 471,716
Tauranga # / 3.4 / 5 / 444,022
Rotorua / 9.1 / 11.5 / 275,110
Whakatane / -1.1 / 0.7 / 324,153
Kawerau* / 10.7 / 7.1 / 163,279
Opotiki* / -2 / -3 / 190,094
Gisborne / 5.5 / 7.7 / 283,167
Wairoa* / N/A / N/A / 190,278
Hastings / 5.1 / 5.6 / 304,028
Napier # / 4.9 / 7.7 / 339,155
Central Hawkes Bay* / 9.4 / 5.8 / 216,096
New Plymouth / 2.9 / 3.4 / 319,913
Stratford* / 12.1 / 16.5 / 214,045
South Taranaki / 4.9 / 8.6 / 196,891
Ruapehu / 15.3 / 12.9 / 158,924
Wanganui / 7.4 / 8.2 / 212,774
Rangitikei / 12.3 / 10.2 / 177,984
Manawatu / 11.2 / 11.6 / 237,641
Palmerston North # / 7.6 / 8.4 / 308,346
Tararua / 13.2 / 13.6 / 156,469
Horowhenua / 13.7 / 13.4 / 249,155
Kapiti Coast / 11.6 / 12.1 / 363,639
Porirua (W) # / 11.7 / 13.4 / 385,578
Upper Hutt (W) # / 13 / 15.3 / 349,556
Hutt (W) # / 10.9 / 12.1 / 374,078
Wellington (W) # / 10.6 / 11.4 / 522,215
- Wellington City & Southern Suburbs / 10.8 / 11.4 / 525,652
- Eastern Suburbs / 10.6 / 11.8 / 567,336
- North Wellington / 10.2 / 10.9 / 469,963
- Western Suburbs / 10.4 / 14.3 / 590,914
Masterton / 19.9 / 22.4 / 261,717
Carterton* / 18.3 / 20.6 / 272,732
South Wairarapa* / 19.4 / 25.4 / 354,798
Tasman / 5.7 / 7.2 / 364,985
Nelson # / 7.9 / 10.8 / 365,198
Marlborough / 8.3 / 12.4 / 358,735
Kaikoura* / N/A / N/A / 347,958
Buller* / 5.8 / 2.7 / 192,238
Grey / 12 / 13.6 / 225,006
Westland / 7.6 / 6.7 / 209,300
Hurunui* / 12.4 / 15.1 / 311,238
Waimakariri / 8.8 / 9.8 / 332,382
Christchurch # / 6.9 / 8.2 / 367,681
- East / 6.9 / 8.5 / 314,891
- Hills / 7.3 / 8.1 / 493,666
- Central City and North / 7.4 / 8 / 415,226
- Southwest / 8.2 / 9.8 / 339,699
- Banks Peninsula* / 12.8 / 12.6 / 464,261
Selwyn / 11.8 / 12.1 / 374,268
Ashburton / 13.5 / 13.1 / 275,296
Timaru / 13.2 / 12 / 223,381
MacKenzie* / 10.1 / 8.9 / 224,500
Waimate* / 26.9 / 18.5 / 177,220
Waitaki / 13 / 12 / 202,795
Central Otago / 12.8 / 12.1 / 305,150
Queenstown Lakes / 6.7 / 12.7 / 611,427
Dunedin # / 6.1 / 6.9 / 279,358
- Central/Northern City / 3.9 / 4 / 276,458
- Peninsular/Coastal Dunedin / 5.6 / 6.6 / 256,944
- Southern City / 5.5 / 7.7 / 273,700
Taieri / 7.3 / 9.7 / 303,427
Clutha / 8.9 / 9.3 / 160,538
Southland / 14.2 / 16.7 / 212,318
Gore / 19.1 / 19.5 / 143,337
Invercargill # / 25.9 / 29.4 / 210,883
/ / /
Total NZ / 8.9 / 10 / 390,636
/ / /
Auckland Area (A) / 9.6 / 10.8 / 507,728
Wellington Area (W) / 11 / 12.1 / 445,859
Main Urban Areas # / 10.1 / 10.4 / 429,908

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.

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