Property market enters spring on the up: Corelogic

House Price Index, Main Centres Relative to December 2003

According to the CoreLogic House Price Index (HPI) for September, nationwide property values are showing signs of growth once again, increasing 0.8% over the month, after generally stalling since May. Property values have held firm through the worst of the economic downturn following the strict lockdown policies implemented in March. The combination of low interest rates, access to credit and renewed confidence has seen demand hold firm.

Limited available supply, in the form of a low number of for-sale listings remains a key contributor to the property market’s resilience to lower values. Additionally, the absence of any meaningful lift in unemployment (yet) has minimised the number of urgent listings or strongly motivated vendors willing to discount their price.

The social restrictions placed on Auckland, and to a lesser extent the rest of the country, threatened to put a further dent in upcoming listings, however based on the trend in appraisals generated by real estate agents on CoreLogic platforms, the blip in activity in mid-August was relatively short lived and activity is now back to normal.

Main centres

The lift in values witnessed at a nationwide level is generally also evident across each of the six main centres, with Tauranga the only exception, though the drop of -0.3% in September is very minor and essentially extends the recent trend of sideways movement in Tauranga since COVID hit (+0.3%).

Property values in Auckland experienced a mini-uptick over the month (0.5%) – the first increase since the COVID-instigated weakness in the market. The rise in property values appears to be relatively broad based with 1.0% monthly growth in Waitakere (average value $864k) compared to 0.7% in both North Shore ($1.24m) and Franklin ($711k).

Broader Wellington is showing the greatest recent growth rate among our main centres at 1.1% over September, with Porirua in particular experiencing exceptional growth of 2.7% over the month. Meanwhile Hamilton has shown some of the most consistent growth, leading to an increase of 3.2% over the last three months and a total of 9.7% over the last year – the highest annual rate since the middle of 2017. Values in Christchurch are also following a relatively consistent upward trajectory, albeit at a slower rate (0.7% quarterly growth), with the annual growth rate reaching its highest point (5.0%) since March 2015.

In the provinces growth is also the order of the month. This includes in Queenstown, where there are the first signs of a potential trough being found after values dropped away a total of 7.4% from earlier in the year. Queenstown values are now at a similar level to April 2018.

Outlook

Recently in their Monetary Policy Review, the Reserve Bank of NZ reiterated their commitment to keeping interest rates low and ensuring credit and confidence remain in the market. Economic forecasts remain tilted toward the downside, as unemployment is set to increase, now that the wage subsidy has ended and the mortgage deferral programme is being proactively worked out of the books.

The perceived safety of property, and availability of cheap money, appears to be protecting the property market from falling though. And so does the lack of stressed sales. All eyes remain on the labour market and unemployment data to see if that starts to change.

Overall, September was another month of resilience in the property market, with activity and values holding up, or even increasing further. The likelihood of rising unemployment is a factor to watch, but for now the key drivers remain ultra-low mortgage rates and the tight supply of available listings.

- From Corelogic (www.corelogic.co.nz)

Index results as at September 30th 2020