House price growth in New Zealand is slowing, new monthly figures from OneRoof and Valocity show.
While the median property value for the country hit a record high of $791,000 in July - a jump of 21% on July 2020 - the pace of growth during the last three months has slowed to 5.5%, down from 8.2% in the previous quarter.
OneRoof editor Owen Vaughan said: “The slowdown suggests that measures taken at the start of the year by the Reserve Bank to take the heat out of the market are starting to work.”
The market slowdown was most pronounced in Auckland, where prices rose just 4.3% in the last three months. House price growth was also weak in Nelson, Northland, Marlborough and Otago. The heat is still evident in Waikato and Manawatu-Whanganui, though, with both regions enjoying value growth of 7.4% and 6.9%.
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Vaughan said the new figures showed that investors were in retreat.
“Investors' share of new mortgage registrations in the three months to the end of June slipped from 22.5% in the previous quarter to just 19% - their lowest share since the national lockdown in April 2020. First-home buyers increased their share slightly from 26.5% to 27.2%.
“It is likely that the 40% deposit requirement for investment purchases has scared off a lot of buyers in this market, with the Government's tax hit on investors and recent rises in interest rates expected to have further cooling effect.”
The figures also highlighted the pressure facing first-home buyers in Auckland, with the median property value in city's western suburbs crossing the $1 million mark. Waitakere joins Auckland City, North Shore, Manukau and Rodney in the $1m mark, with just Franklin and Papakura sporting median values of less than seven figures.
Vaughan said: “The southern fringes of Auckland are the places to target if you are a first-home buyer in the city, with new developments coming on-stream close to rail lines and the southern motorway.
“However, value growth in Franklin and Papakura has accelerated well above the Auckland average in the last 12 months and both saw growth of above 6.5% and 4.8% in the last three months. It may not be long before they join the rest of the city in the $1m club.”
Of New Zealand's major metros, Christchurch remains the most attractive for those trying to get on the property ladder. The city's median property value sits at $552,000 - well below the national median and that of Auckland, Wellington, Hamilton and Tauranga.
Prices in July 2021 are still up 20% on July last year and 6.8% on the previous three-month period, but first-home buyers are very active in the city, and their 32.4% share of mortgage registrations last quarter is the highest share for first home buyers in the country.
“Christchurch's supply of new housing stock is still above levels seen in other major metros, and new housing developments on the city's fringes and in Kaikoura are proving attractive,” Vaughan said.
“For first-homes buyers, there is a big difference between the 20% deposit for a house that costs under $600,000 and one that costs just over $1m, which is increasingly the reality for buyers in Auckland, Wellington and Queenstown.”
Wayne Shum, senior researcher at OneRoof's data partner Valocity, said that despite the slowdown the main drivers of house price growth in New Zealand remained in place.
“June house sales were their highest for June in five years. Buyer demand is still high, listing volumes are low, and have been for some time, and there is a shortage of new homes in many of the main centres. More importantly, interest rates are still low,” he said.
“However, there are headwinds facing the market, and these may accelerate the slowdown experienced in the last three months. The Reserve Bank has announced that it is halting its monetary stimulus program and the market is now pricing in rate rises on the back of August's expected increase in the official cash rate.
“The Reserve Bank is also investigating the use of Debt to Income ratios as a tool to further dampen price growth, although it is unknown at this stage how or when this tool will be used.”
Shum said pressure was building in the construction sector as well.
“Across New Zealand, record high number of building consents were lodged over the past year - some 40,000. However, the lack of material and labour means higher building cost and delays. Some projects may not commence as the result. It is too early [to] estimate how many of these consents will be converted to finished homes, or when they will arrive onto the market.
“Whilst too early to predict the exact impact this may have on the housing market, it is likely that more cautious market behaviour may begin to emerge in the coming months.”
Housing market snapshot
Hot topic: New builds are worth buyer attention right now as the IRD has launched consultation on interest deductibility for the property category. Off-the-plan developments are also attracting strong interest.
Cause for concern: Interest rates are starting to rise, which could have adverse impact on investors and the purchase power of first-home buyers.
Best bet for first-home buyers: Existing homes where investors have withdrawn from purchasing.
Best bet for investors: New homes where interest deductibility may still be possible
