Property reporter Katharina Charles investigates ‘multi-speed’ markets in New Zealand with new insights from Bayleys Research.
While residential property values begin to plateau in New Zealand’s largest city, sale values across some of the regions have continued their positive upward trajectory - but how long before the regions follow the path paved by Auckland?
Widely believed to experience an approximate 12-month lag time behind Auckland’s residential property trends, sale results from regional New Zealand have taken a different route this cycle - exacerbated by the Reserve Bank of New Zealand’s (RBNZ) loan to value restrictions (LVR) which were imposed on investors between October 2015 and July 2016, making it easier to finance regional property purchases.
The same lag does not always follow the same blueprint when Auckland price growth reduces and enters a holding pattern.
“The difference in performance of regional markets compared with that of Auckland is dependent upon a number of factors. While value gains are already tapering in some regions it appears that others will see momentum for a number of months yet,” says Bayleys Research manager Ian Little.
“There is a lag between Auckland and other locations which leads to a gap and what we often refer to as a multi-speed market.
“The case in point is that, at present, within all 15 of the regions outside of Auckland the amount of stock available to market is sitting well below their long-term average. When combined with recent levels of sales activity, the regional weeks to sell the inventory, is also lower than normal” says Little.
The latest September Quarter 2017 statistics from realestate.co.nz on current inventory, decade average inventory, current weeks to sell inventory and current inventory is as follows:
• Northland: Inventory - 1,268 vs 3,283 - weeks to sell inventory – 16 vs 36
• Auckland: Inventory – 7,534 vs 10,303 - weeks to sell inventory – 18 vs 23
• Waikato: Inventory - 1,560 vs 2,968 - weeks to sell inventory – 29 vs 98
• Bay of Plenty: Inventory – 1,416 vs 3,676 - weeks to sell inventory – 12 vs 43
• Gisborne: Inventory - 141 vs 354 - weeks to sell inventory – 12 vs 38
• Hawke’s Bay: Inventory - 511 vs 1,465 - weeks to sell inventory – 10 vs 33
• Taranaki: Inventory - 620 vs 969 - weeks to sell inventory –18 vs 27
• Manawatu: Inventory - 983 vs 2,150 - weeks to sell inventory – 13 vs 35
• Wellington: Inventory - 1,099 vs 2,414 - weeks to sell inventory – 7 vs 18
• Nelson-Tasman: Inventory - 944 vs 803 - weeks to sell inventory – 25 vs 41
• Marlborough: Inventory - 291 vs 775 - weeks to sell inventory – 12 vs 44
• Canterbury: Inventory – 4,431 vs 4,342 - weeks to sell inventory – 18 vs 25
• West Coast: Inventory - 567 vs 804 - weeks to sell inventory – 55 vs 126
• Queenstown Lakes: Inventory - 557 vs 1,548 - weeks to sell inventory – 20 vs 71
• Otago: Inventory – 596 vs 1,322 - weeks to sell inventory –11 vs 24
• Southland: Inventory - 578 vs 1,079 - weeks to sell inventory – 16 vs 32
“This data and the signal from our offices in these locations is that this dynamic will not change quickly."
“Inventory levels are still low. While pockets of areas are facing a slight increase in inventory, purchaser demand remains strong enough to keep momentum going through 2018”.
“While the ‘frenzy’ of 2015 and 2016 have passed and financial stability has been restored, we expect a majority of property markets outside of Auckland to experience a continued period of positive growth over the next year, albeit the rate of growth is expected to moderate compared with recent trends.
“This is a result of financial restrictions placed on purchasers who face higher prices and consequently a higher cash deposit. This is combined with stricter credit restrictions and the expectation that interest rates will increase gradually next year from the record lows at which they have sat since the Global Financial Crisis.
“Singularly, none of these are a major deterrent, but the combination of these factors will make investors and owner-occupiers more discerning in their choices.
“Quality remains a strong consideration in buyer’s decision-making and analysis of buyer behavior shows this also enables purchasers to make quicker decisions.
“Properties that are not presented in the best possible light or require a little bit of extra cashflow to renovate will face tougher scrutiny, no matter where they are.
“This will likely flow through to a slight extension in the time it takes a transaction to close, but we don’t foresee any major and abrupt shifts.
“This will be a key metric to watch over coming months to see when we reach tipping point, supply outweighs demand and regions outside of Auckland see prices enter a holding pattern,” Little concludes.