There have been many reports in the media about the performance of the property market — more opinion than fact. Over the years you’ve been reading my updates, you know me well enough to know that I like the facts.
There are some key drivers in any property market: employment levels, net migration, crowding, property sale volumes, construction, affordability, rents, and number of days to sell property to name a few. All of these remain at relatively stable levels.
The first home buyer market is certainly buoyant (new mortgage registrations rose from 24.8% to 26.4% last month) with lenders easing up on restrictions along with attractive interest rates — with no predictions of tightening anytime soon.
Changes to LVR's
The RBNZ Financial Stability Report released on Wednesday the RB noted the slowing in mortgage lending growth and house price inflation. In response they have cut the minimum deposit requirement for investors from 35% to 30% (having cut it from 40% a year ago). And banks may now have up to 20% of their lending to owner occupiers at less than 20% deposit. This had been 15% from the earlier 10% percentage of volume limit.
Will these changes affect property values?
Not really. At least, they certainly won’t lead to large rises in house prices, but the changes should bring further stability to the market. Remember when they imposed the changes as the market was rising? They were never to bring house prices down, they were just to slow the growth and stabilise the market. Now it’s the reverse.
The sellers market has passed (2 years ago), but the balanced market environment we are presented with is a healthy one. Values remain relatively stable along with stock levels and sales volumes. I see this property climate remaining similar for a few years yet.
Figures presented by CoreLogic showed that the more expensive the property, the more likely it was to sell at a lower price compared to its CV.
In the past three months, homes with CVs higher than $1 million have typically been selling for prices 1–4% below their CV. Mid-priced homes with CVs between $800,000–$1M have typically been selling for prices close to their council value.
Homes with CVs below $650,000 are still selling for prices as high as 9% above their CV.So how is a CV calculated exactly?Property Institute of New Zealand Chief Executive, Ashley Church, says that the valuations are a ‘guesstimate’ rather than an accurate indicator of what a home is actually worth. “CVs are conducted once every 3 years and they’re a ‘snapshot’ of the approximate value of any given property at that moment in time.
They shouldn’t be regarded as an exact measure of the value of a home — and they’re certainly not intended to provide an ongoing price guide.”The methodology for a Council Valuation is very different to a formal valuation. A CV is a blunt instrument. It’s a computer based assessment of the value of your home based on what other homes in your area have sold for; whereas a formal Registered Valuation is conducted onsite and takes account of the condition of your home, any renovations you might have made, whether you have a pool, the number of bedrooms you might have, the condition of your home — all of the things that make it unique.
Mr Church says that the question of the value of your home has also been further confused by the recent proliferation of ‘free’ online home valuation services. “There are a couple of paid services that are getting much better at remote assessment – but the free ones are generally about as effective as reading tealeaves or chicken entrails and their advice should be treated with a grain of salt.”
As we look at the statistics produced in this first month of spring, it tells us how the market has performed in September but also how this will likely influence property values as we move closer into summer.
Realestate.co.nz reported that there were 3,896 listings added on the site in Auckland (up 31.9% compared to September last year). In the regions (excluding Auckland), an all-time high national asking price for properties was recorded, with the average asking price across New Zealand standing at $690,733. Property value growth in the Auckland region has increased by 0.8% year on year, despite a 0.7% drop in the last quarter setting the Auckland median value at $1,047,415.
Buyer activity viewing levels are up reporting 855,326 unique browsers searching listings on the site across the country during September. New listings are higher than they were a year ago in Auckland — I see that number increasing further this quarter.
In market feedback from investor groups, few existing landlords are thinking of responding to new regulations by selling their properties. Likewise, for existing home owners who are considering selling but require a higher sale price for their existing home in order to purchase their new home, affordability may encourage them to keep their property off the market.
Then there's continued competitive pressure in the mortgage lending market and further decreases to interest rates by some banks which add to the balance of a stable property market.
What does this suggest for the property market over spring into summer?
With affordability remaining a factor for some buyers looking to buy in the Auckland market and some sellers deciding to hold tight rather than list, my opinion is that the rise in listings over the next few months is not likely to go above normal levels that we traditionally see in this season. This should see Auckland property values and the market remain steady.