QV: Housing market cools in Auckland, heats up in other regions

The nationwide average shows residential property values increased 14.2 per cent - from $488,674 in December 2014 to ...
JOHN NICHOLSON/FAIRFAX NZ

The nationwide average shows residential property values increased 14.2 per cent - from $488,674 in December 2014 to $558,146 in December 2015.

Auckland's red-hot housing market is finally cooling off, with other major centres around the country reaping the benefits.

The latest figures from valuation company QV show property values increased 14.2 per cent during 2015 - from $488,674 in December 2014 to $558,146 in December 2015.

QV National spokeswoman Andrea Rush said massive increases in Auckland home values during the first nine months of 2015 led the Government and the Reserve Bank to announce they would introduce measures to curb Auckland investors.

Change in values in regions around the country.
QV/CoreLogic

Change in values in regions around the country.

"These huge hikes in home values and pending restrictions on investors saw many look to move or invest outside of the Auckland region for more affordable homes or better rental yields during 2015.

"This resulted in an increase in activity and demand in previously slow housing markets in upper and central North Island centres including Hamilton, Tauranga, the Waikato District, Hawkes Bay, Whangarei and Rotorua."

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Following the introduction of the new measures designed to curb house prices, the rate of growth in the Auckland market slowed in October and November, while values in many other centres including Wellington and Dunedin saw significant value increases, Rush said.

"However, the Christchurch market remained relatively steady during 2015 as supply of homes from the rebuild met demand for housing in the city meaning values there increased only moderately over the past year."

Change in values in regions around the country.
QV/CoreLogic

Change in values in regions around the country.

Residential property values surged ahead in 2015 at a rate of more than 10 per cent faster than for the same period in 2014, she said.

Home values in the Auckland region increased 22.5 per cent - from $761,858 in December 2014 to $933,264 in December 2015. They rose 4.1 per cent over the past three months, but only 0.2 per cent during the final month of the year.

Auckland house prices are now 70.8 per cent higher than the previous peak of 2007.

Home values in the Papakura District increased the most with home values rising 29.9 per cent year on year, as Aucklanders looked further out to the super city boundaries to find an affordable entry into the market.

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Manukau suburbs saw the second largest year on year increase rising 26.3 per cent, while Waitakere homes values were close behind rising 25.6 per cent.

Home values in North Shoreincreased by 22 per cent in the year to December 2015, while the former Auckland City Council suburbs increased 20.7 per cent. Franklin District values rose 20 per cent andRodney saw values increase 18.8 per cent.

In the other major centres, house values also continued to rise.

In Hamilton City, house prices surged ahead - up 19.5 per cent year on year and 6.7 per cent since October.

Tauranga home values continue to rise quickly, up 18.2 per cent year on year.

Home values in Wellington also started to rise at a much faster rate over the past three months of the year, than they have since before the previous peak of 2007.

House prices in the capital increased 5.2 per cent year on year.

Values increased the least in Christchurch - up just 2.6 per cent year on year.

In Dunedin, home values rose at a moderate rate of 5.7 per cent.

The Waikato District also saw house values increase - up 19.9 per cent.

First home buyers return

The figures also showed the type of buyers who were purchasing properties, including first home buyers, movers, and multiple property owners.

The most active group of buyers, particularly in Auckland, were those who owned multiple properties - mostly investors.

Their share of sales increased from 35 per cent in 2013, to a peak of 40 per cent in the second half of 2015.

"The increased activity by investors was likely a contributor to the Government and Reserve Bank putting in place measures during 2015 to slow down investor activity."

The other major trend during was the return of first home buyers to the market.

In October 2013, the Reserve Bank put in place the Loan to Value (LVR) speed limits which limited banks' lending to customers with low deposits.

CoreLogic director of research Jonno Ingerson said: "Now first home buyers are finding ways back into the market either by saving for a larger deposit or lowering their price expectations.

"As a result the share of first home buyer sales is now back to 23 per cent and climbing. The story is similar outside Auckland."

On the move

Last year, there was an increase in Aucklanders moving to Hamilton, Tauranga and Waikato.

In Hamilton, 22 per cent of the sales were to people moving from Auckland. This is up from 13 per cent in 2014.

In Tauranga, this movement of Aucklanders has been increasing steadily since 2012 when Aucklanders accounted for just 12 per cent of movers, increasing to 30 per cent by the end of last year.

Ingerson said with improved state highways, it was possible for people to still work in Auckland but live somewhere much cheaper.

"Not only are Aucklanders choosing to cash up their properties and move to a cheaper town, but they are also increasingly investing elsewhere, chasing better rental yields and more affordable properties."

In 2014, 6 per cent of all purchases in Hamilton were by investors who already had properties elsewhere in the country and were buying a Hamilton investment property for the first time.

The vast majority of these were Auckland investors starting up in the Hamilton market. In 2015, this increased to 14 per cent of all sales in Hamilton.

Likewise in Tauranga where 10 per cent of 2014 sales were to investors buying in Tauranga for the first time, this increased to 13 per cent at the end of 2015.

"There has been anecdotal evidence of Auckland investors being increasingly active in Wellington but there is little evidence in the data to support that currently" says Ingerson.

Outlook for 2016

Ingerson said 2016 looked positive for most of the country with transaction numbers picking up and values increasing in many areas outside Auckland.
 
"With the various government and Reserve Bank restrictions now beginning to take effect, and foreign buyers apparently much less active, our expectations are that Auckland values will drop a few percent over the next few months.
 
"However, mortgage interest rates are at historic lows, migration at historic highs, and there is a substantial shortage of housing in Auckland," he said.

"These are strong factors putting upward pressure on Auckland prices, and as a result any drop in values is likely to be shallow and short-lived."
 
While Auckland may "take a breather", the surrounding areas were likely to continue to rise, Ingerson said.

This would likely be driven both by local demand and by Aucklanders choosing to move to more affordable locations, he said.

"However, the value growth we saw in Hamilton in late 2015 of more than 10 per cent per quarter will not continue, instead settling back to a more moderate rate of value increase.

"Most of the top half of the North Island will continue to increase likewise."
 
It would be a more variable outlook further south where the effect of Auckland was far less, he said.

"Wellington values have been accelerating from the past few months and that will continue in a market where current demand is outstripping supply.

"Dunedin will also continue to increase, while Christchurch is more likely to stay flat."
 
The easing of the LVR restrictions outside Auckland would be a key contributor to strength in those markets, as it would allow more first home buyers and potentially upgraders to purchase, he said.

 - Stuff

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