“We've been talking about a swing in the market, but expected it to be more gradual”
House price data has revealed a noticeable slowdown in the growth of property values for the month of June, with CoreLogic data showing a “significant” change in direction.
Head of research Nick Goodall said there had been “truly exceptional” growth in property values over the last year, with house prices rising by 22.8% in the 12 months to June 2021. However, the nationwide growth rate has now slowed for the second month in a row, with a 1.8% rise recorded in June 2021.
“1.8% growth is not a slow rate in itself, but when we delve into the regional detail, the easing of momentum becomes clearer,” Goodall said.
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“Twelve of Aotearoa’s largest markets experienced a slowdown in growth from May to June, with a further three cities recording minor drops in value over June. Gisborne values dropped by -0.9% over the month, and while the longer-term context of 35.8% growth in the last 12 months is important, the change in direction feels significant - especially the timing of it.”
“We’ve been talking about a swing in the market for a while, but expected it to be more gradual than what Gisborne has shown,” Goodall said.
“We also don’t want to get too carried away with the short term read on the market, but it’s likely the tightened loan-to-value ratio limits, alongside increased uncertainty due to government policy changes, are starting to impact buyer behaviour.”
Goodall noted that Auckland, Wellington and Christchurch’s growth rates remained “steady” over this time, with Hamilton also showing some reasonable growth at 1.9%.
When it comes to investors, he said there hasn’t yet been any evidence of them leaving the market, but there has been a reduction in demand and activity within that area.
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“Mortgage investors’ share of the market for June was 24.2% - the lowest since June last year, and well down on the 28.8% share secured in March this year,” Goodall said.
“The downward trend is very similar to that witnessed the last time investors required a 40% deposit, so it’s likely that the LVR limits are the key driver of this change. Meanwhile, first home buyers are offsetting the investor decline, with their share of June sales at 25.1% - up from 21.1% in March 2021.”
“Looking ahead, the prospect of higher interest rates is getting closer every day,” Goodall concluded. “The next likely tool to be adjusted will be the OCR. Calls for an August increase are probably premature, but of course, what seems sensible today can quickly change.”
