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Tall Tales: Market commentary by Bayleys national residential manager Daniel Coulson

Tags: Research Residential

There’s been plenty to occupy ourselves with this month following unpredictable wet weather, Budget 2017 speculation and of course that headline grabbing report from Goldman Sachs...

...however through it all, residential property has continued to experience value increases, just not at the well-above trend growth rates experienced in recent years.

The headlines were abuzz with interpretation from the Goldman Sach’s report, but keep reading past the frightening banner (‘Global firm gives New Zealand two years to tank’), and you might just discover that Goldman’s ‘bust’ is no more than a five percent correction in sale values - excluding inflation which just increased to 2.1%.

The rebalancing of price growth is not a new signal or a new trend. The Reserve Bank of New Zealand (RBNZ) has been looking to stem the exorbitant growth rates and increase financial stability for some time now. Their latest financial stability review (FSR) shows that while they are always on the lookout for new measures to implement to keep price growth stable instead of fluctuating cycles, the market remains more stable for now.

Although some of the measures implemented by the RBNZ have worked, it has not been in isolation. A reduction in mortgage availability continues to have influence on buyer behaviour following recent decisions from Australian-owned banks to ‘tighten their belts’ in order to minimise exposure after a strong run in lending.

Other important factors in play on why median or average prices are coming off the major highs are seasonality, a shift in listing volumes, the differences in quality of stock being purchased, location, and price points - as recently pointed out by Quotable Value (QV).

The monthly QV House Price Index shows New Zealand's residential property values increased 9.7 percent over the past year, but just 0.4 per cent in the past three months.

Although much has been mentioned of the Auckland slowdown, QV’s data showed that Auckland regional growth was still 9.3 percent for the year to May, albeit the latest quarter of growth rates has slowed.

QV noted that the record prices were still being achieved for well-positioned and well-maintained properties, but where the property doesn't meet those criteria, sellers would potentially need to settle for a lower price than they may have achieved mid-last year.

Across the country sales figures from the Real Estate Institute of New Zealand (REINZ) show that the national median has risen 10.4 percent to $540,000 year-on-year with a widespread decline in inventory (31 percent year-on-year) underpinning national housing stability, which paints a consistent (albeit slowing) picture for sale volumes and price growth.

Three regions have recently achieved record median sale prices, as the Waikato, Wellington and Otago all hit double-digit growth showing that despite bad weather, school holidays and a late Easter break, there is certainly still an appetite to be fed for pre-election property purchases.

Past reviews of property’s cyclical behaviour show we can expect that the coming months to September will see an ease of sorts as the national picture follows in line with Auckland – which looks to be further through the cycle.

While the Government’s recent Budget announcements appeared to put more money into pockets, $11 billion towards severely lacking urban infrastructure projects and deliver more affordable housing, we do expect that the ever-increasing pressure on supply will continue its grip on the housing market post-election, and we are looking forward to an increase in values to coincide with an easing in credit conditions towards the latter half of this year.

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