The property market has emerged from winter hibernation ready to surprise and delight, although where you live in the country will very much dictate the degree of surprise and delight and if that surprise is favourable or unfavourable?
If you start by looking at the national picture we are seeing a fairly stable market with prices rising more slowly. In August the year-on-year increase was 4.8% based on the REINZ stratified price index. Six months ago the year-on-year increase was 8.3% and 12 months ago the increase was 9.6%.
Property price trends tend to follow volume trends and so it is we continue to see weakening of sales which began nearly a year ago around September last year. Over the winter months the number of property sales fell 12% as compared to the same period last year. To put that in context during the winter last year average daily sales totalled 210, whereas this year the daily average was 188.
The available stock of property on the market continues at a fairly steady level with around 38,000 properties on the market across the country, very much the same level as last winter.
This national picture of the property market is really a reflection of the aggregation of hundreds of local markets as each region of the country experiences its own circumstances.
There are those regions where there is strong demand and weak supply and equally those regions were buyers are in short supply and prices are falling.
The weakest property markets at this time would have to be Southland and the Wanganui / Manawatu region. Both are experiencing prices falling and weak level of sales. This situation is un-nerving especially for buyers who are apprehensive about entering the market despite a good selection of property with little competitive pressure. Both of these markets have seen a worsening of their situation over the past 12 months and at this time show no sign of improvement.
The majority of regions across both North and South Islands on the other hand are currently well balanced having a good selection of property for sale; a healthy pace of sales and price inflation below 5%, typically these are represented by regions such as Northland, the Hawkes Bay, Gisborne, Marlborough, Otago and Wellington.
Two unusual regions are Taranaki and West Coast. Both present challenging markets where buyers and sellers are seeing weak demand with a large inventory of property on the market. Unusually, just where you expect to see falling prices both regions are experiencing price increases year-on-year of over 5%, most likely due to the type of properties being sold rather than any underlying price pressure.
That leaves the remaining regions, in the main, experiencing sellers’ markets - that classic situation where the pace of sales are strong, the availability of property is tight and as a consequence the pressure on prices is leading to year-on-year price growth of over 5%. In the extreme regions of Canterbury that price hike is still over 10% and Auckland is showing 12.5% year-on-year increase. Waikato, Bay of Plenty and Nelson are seeing less dramatic rises. All though are definitely seeing an easing in these pressure points as the markets come off-the-boil which holds some hope for buyers who have not been able to leverage much influence over the past couple of years.
How all of these markets will trend in the coming months as the market heads towards summer with the peak listings season of spring is the key question. With the election behind us and sustaining business confidence and some indications for delays in interest rises we are likely to see sales turn around and start to increase on a year-on-year basis. This increase is not likely to be huge as markets tend to turn slowly but the expectation is that annual volumes should lift in the next 12 months from the current levels of 74,000 to over 85,000 per annum.
As noted earlier, price tends to follow volume allowing for a suitable time-lag. That being said, with price increases currently slowing from significant double digit increase in some cases, it is more likely that the next 6 months will see prices moderate and it could well be a year from now before any significant uplift in price increase will be seen. Of course these trends will as ever represent the aggregation of all of the individual regional and local markets. It is likely the major metropolitan markets will see more dynamic trends whilst provincial New Zealand will see less of the improvement.
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