Property data provider releases forecast
Despite house price increases across New Zealand in September, the latest CoreLogic House Price Index (HPI) suggests that market momentum continues to wane.
The report focused on a 1.4% increase in housing values nationally last month, a drop from August’s monthly growth rate of 1.6%, and the fifth consecutive month of easing growth rates.
Property values in Rotorua rebounded (1.9%) in September after falling -0.9% in August. However, the average value ($656,000) in the Sulphur City is down -2.4% over the last three months. Meanwhile, the monthly growth rate in Gisborne dropped into the negatives (-0.7%) for the second time in four months, leaving the average value ($595,000) up only 1.6% for the last quarter.
CoreLogic also found a noticeable bounce in Queenstown’s performance (9.1% quarterly), taking the average value to almost $1.5 million ($1.49 million) – the strongest growth rate since June 2016, and the annual increase to 30.4%, a $347,000 rise since October 01, 2020.
In Hastings, the quarterly growth rate also accelerated, up 8.3%, taking the annual change to 41.4%, by far the largest rate of growth on record for the city (back to 1990).
Meanwhile, Tauranga saw a 7.0% increase in values over the quarter, and its annual growth rate of 31.6% hit its highest level since March 2004. The Wellington area’s annual rate of growth also continued to break records at 35.9%.
By contrast, Dunedin values plateaued over the month (0.0% change), resulting in a 2.6% quarterly rate of growth, the lowest of the main centres.
Read more: CoreLogic: Housing affordability dramatically declines across New Zealand
At Alert level 2 for the majority of September, market activity across the country, except Auckland, has started to return. However, three weeks at Alert level 3 or above, combined with movement restrictions during Alert level 2, means the return has been gradual and subdued.
“While this time around, we were better prepared and experienced in how to carry on throughout lockdown, the limitation of movement and social interaction undoubtedly disrupts the property market temporarily,” said CoreLogic NZ head of research Nick Goodall.
CoreLogic expects market growth to slow down through 2021 and into 2022, with a key driver being increasing interest rates. However, it also expects local factors to play a part to different degrees across the country, including investor appeal, affordability constraints, the health of the local economy, and borrowers’ debt management behaviour.
Goodall advised investors and owner-occupiers to continue preparing for higher mortgage repayments, while investors need to adjust to the interest cost on mortgage repayments not being fully tax deductable from October 01.
“We received clarification that new build properties are exempt from the changes, which at least provides some certainty for developers and investors increasing our housing stock. Interest costs for new build properties will be tax deductable for 20 years, which must be seen as a good result to ensure confidence in this market to further address our undersupply of properties,” Goodall added.
