Latest property market update - July

The latest changes in the property market are:

  • Keeping the Loan to Value Ratio (LVR) speed limits as they are in Auckland, but loosening them across the rest of the country.
     
  • Requiring that investor loans in Auckland have a 30% deposit and that banks hold more capital against these investor loans. This will potentially raise those interest rates a fraction.
     
  • Ensuring that any sale of a residential property anywhere in NZ not owned by the occupier and sold within two years will incur capital gains tax.
     
  •  Requiring foreign buyers to have a New Zealand bank account and IRD number plus a link back to their home country IRD number.
  •  The latest CoreLogic/QV Monthly House Price Index has just been released showing that nationwide values are up 9.0% year on year and 3.1% over the past three months.

Auckland values are rising much faster than anywhere else. No news there. In the past twelve months, values have increased 16.1%, and 5.4% over the past three months. Part of the reason for the rapid increase is a bit of catch-up following a slow-down in 2014, when the market reacted to the introduction of LVR speed limits in late 2013. Recent months have seen values recover some of that 2014 slow-down and return to the rates they were showing before the LVR speed limits came into effect.

From 2002 to 2004, values were increasing at an annual rate of over 15% compared to a previous cycle, values peaked at 26% in late 1994 and 22% in early 1996. Sales activity in Auckland has been very strong, not far off what it was at the beginning of the previous boom in 2003/2004.

There is no sign of a slowdown in Auckland values… yet. It may take a while for the government announcements to have an effect (if any).

Hamilton, Wellington, Christchurch and Dunedin are all up less than 5% year on year. Tauranga is up 6.7% year on year, and 4.1% over the past three months. This increase in Tauranga values could be attributed to a spread of the ‘Auckland effect’ where buyers are now considering cheaper alternatives to the expensive Auckland market. Equally, it could also just be local effects. There is little evidence that values are increasing in other areas close to Auckland, including Thames/Coromandel, Hauraki, and the Waikato District.

The analysis from Corelogic of sales turnover shows that in Auckland the most common ‘hold period’ is 1 year. Compare that to the rest of the country where properties are most commonly held for 7 to 8 years. So the governments latest ruling that a residential property anywhere in NZ not owned by the occupier and sold within two years will incur capital gains tax may have an impact on the market.

Overall, the team at Corelogic believe that Auckland values will continue to rise for the next couple of years but at a slightly slower rate. I also don’t expect to see the rest of the country to follow Auckland up anytime soon.

Source: Corelogic

Shannon Corbett