With less than two months to go before Christmas, the property market and the real estate industry supporting it starts to think about the forthcoming summer and the relaxed pace of life we all long for after another active year.
Prior to the Christmas break, the market and real estate agents are expecting to be busy as the month of November and early December tends to see heightened levels of activity as new properties flood the market, and buyers become more active as if the sunshine somehow powers their property solar cells!
This year though, I don’t think we are going to see a particularly buoyant run up to the Christmas break. This perspective and insight can be gleaned from observing the September property data released over the last few weeks.
As ever we live in a country with two very different property markets. The market for those in Auckland and its surrounding regions of the Waikato, Bay of Plenty and some parts of Northland continues apace with strong demand matched to rising prices. Certainly the market is not a hot as was seen heading into summer last year. More uncertainty and ever higher prices matched to more constraints around access to and costs of finance has taken the heat out of the market.
However, there are early signs that sales volumes that have been falling year-on-year for the best part of 12 months are beginning to pull out of that deep dive and are likely to show growth as we head into 2015. The underlying factor is that the demand generated by economic activity and migration to these regions is stoking the market and this is likely to continue and potentially increase heading into the new year.
A very different property market is experienced in the provincial regions of NZ where property is far from the major topic of conversation. In quieter parts of the country, activity witnessed over the past 3 years leaves a sense of the property market very much passing them by.
The weakest of the regions would have to be the likes of Southland, the West Coast and Taranaki where the pace of sales is slow, available inventory is high, and consequentially prices are somewhat lackluster and at levels which show no real improvement from the last peak of the market, now a somewhat distant memory of 2007, 7 years ago!
The underlying issues with these provincial regions are economic drivers; there is simply not the demand that is being experienced in the Auckland and surrounding regions from migration and investment. Property investors in particular are seeing these provincial regions as riskier than the major metro areas where capital gains are looking more certain.
Yields from property investment tends to be better in the provincial regions as rental prices as compared to property prices are better, but it seems clear that investors are far more focused again on capital growth as they were 10 years ago when the market was very active with such investors.
Another factor is risk. Investors see more certainty of full tenancy in the more dynamic regions, whereas the uncertainty related to the continuity of tenancy plagues these provincial areas.
Across the rest of the country a significant number of regions are what would be best described as balanced markets, where the pace of sales is steady as judged against the long term trend; where there is a good selection of property for sale and where the price inflation is modest, indicating price rises of low single digits. These regions such as Otago, Nelson and Marlborough, the Hawkes Bay and Gisborne as well as the Manawatu and Wellington region, are markets which should be seen as steady. Markets for which buyers and sellers can act without undue pressure, where property presented well and priced well will sell quickly, allowing people to move on with their lives. Markets that are so different to the tricky markets highlighted earlier that are either red hot or icy cold.
As ever there are regions which are classically seen as outliers – markets that exhibit a very different trend for unique reasons. In New Zealand these are the regions of Christchurch/Canterbury and the Central Otago Lakes region including Queenstown.
Certainly the story of the property market in Christchurch is well known and continues as it has done for the last few years, with shortages of available inventory and a growing demand as the pace of redevelopment accelerates.
There are early signs of some easing in the pressure witnessed in the market compared to this time last year, as available inventory builds and the pace of sales comes off the highs seen a year ago when close to a third of property on the market sold each month. That’s now back to a quarter – a more stable long term level for the region. Property price inflation though remains high hovering around the 10% per annum.
Queenstown is no doubt firmly set on the world stage as a destination of choice and this is reflected in the property market definitely favouring sellers with a strong pace of sales, weak supply of available property for sale, and a price inflation that is building from low single digit levels earlier this year towards double digit percentage increases.
So as ever it pays to see the New Zealand property market as a collection of individual markets which exhibit trends and patterns reflective of specific circumstances, rather than as one homogenous market.
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