Data shows new policies’ impact on the market
As the government continues to find ways to fix the housing crisis, experts are determining if the New Zealand property market remains red-hot or has finally shown signs of slowing down – but what does the latest data say? CoreLogic’s latest House Price Index (HPI) found that, nationwide, values increased by a further 2.2% in May.
The report noted that the May 2021 figure was down from the 3.1% growth rate in April and provided evidence of a slowdown as buyers adjusted to recent policy announcements and tightening lending criteria.
The annual growth rate increased to 20.5%, up from 18.4% in the previous month. However, base effects hit the annual measure – where a year ago, economic activity (including the housing market) had stalled as the country moved through the COVID-19 pandemic-related lockdowns.
In Tauranga, property values increased by 5.1% in May. However, CoreLogic noted recent volatility in the monthly data, recording a -1.5% drop in February after 6.8% growth in December 2020.
“This leads us to pay more attention to the quarterly change, which in this case is a still-very-strong 10.6% – similar to both Hamilton (10.4%) and Wellington area (10.8%),” the report said.
Wellington’s average property value surpassed the $1 million barrier, while Tauranga was not far off at $968,342.
In Auckland, the average property value exceeded $1.25 million after 16.5% growth in the last year. Meanwhile, Auckland City’s average value was nearly $1.5 million, and Northshore was not far behind at $1.44 million.
Property values in tourism hotspots Queenstown and Rotorua jumped by 3.9% in May 2021, a continuation of recent strength as the economic confidence for these areas improved. The changes were driven by the opening of the trans-Tasman bubble and the $200 million tourism package announced by Tourism Minister Stuart Nash that aims to help the industry cope with the economic loss of international visitors and prepare for the future.
Meanwhile, the easternmost city in Gisborne saw a continuation of its recent strong momentum, with the annual growth rate hitting 36%, the most significant rate in over 15 years. CoreLogic found similar growth consistency in Whanganui, Kapiti Coast, and Palmerston North – recording annual growth rates above 34%.
Nick Goodall, the head of research at CoreLogic, noted the government and the Reserve Bank of New Zealand’s (RBNZ) latest house price forecasts, expecting a significant reduction over the coming months.
“The CoreLogic HPI (which analyses a rolling three months of sales data) provides some evidence of this, while analysis of CoreLogic preliminary sales data goes a step further, illustrating the most recent sales are not performing at the same level as those earlier in the year,” Goodall said.
“This reflects the impact of both the tightened loan-to-value ratio (LVR) restrictions, imposed by the RBNZ, as well as the March 23 housing policy announcement from the government, phasing out the ability for property investors to deduct their interest expenses from their end-of-year tax returns.
“While these changes have caused some investors to sit back and take stock of their portfolio, it appears this pull-back in demand has been mostly made up for by other investors, likely with less debt, and owner-occupiers who had previously missed out while competing in a very heated market.”
