Times have changed for New Zealand’s housing market. Moderate growth and steady sales activity – with a touch of seasonal slowdown in the mix – are the name of the game. Across the board, the latest data shows the national propery market is in pretty solid, albeit unexciting, shape.

QV’s May data records that, once adjusted for inflation, nationwide values were up by 5.8% year-on-year, but just 0.8% over the past quarter. This left the national average value at $677,996.

In similar style, REINZ had May’s national median house price up by 4.5% year-on-year, and by 1.1% on April, once seasonally adjusted, to a new record of $562,000. But national sales activity in May, once seasonally adjusted, was up by just 1.8% year-on-year, and down by 1.8% on April.

It’s all a far cry from the days of spectacular price growth and the corresponding predictions of doom. These days it is the government’s housing and tax policy changes which are generating the most speculation and uncertainty.

With a two-speed market and a regional lag still at play, it seems timely to take a closer look at the state of play in markets around the country as those changes start to become a reality.

Centres Take It Easy

It’s impossible to ignore the implications of the Auckland market’s slowdown. That’s not only because of oversized impact on the national market overall, but because it is an indication of what is likely to come in regional markets. And the Super City tale told by May’s data is one of declining prices and a market which is taking a break.

According to REINZ, Auckland’s median house price was down by 0.8% year-on-year and by 0.4% on April, once seasonally adjusted, to $852,000 in May. But it also reveals that, once seasonally adjusted, sales activity in May was up by 5.2% year-on-year and by 1.1% on April.

REINZ chief executive Bindi Norwell says the Auckland market looks to have found a middle ground around the $850,000 mark, as three out of the past five months have seen a median price in this range. “This suggests that the standoff between buyers wanting a bargain and sellers wanting an unrealistic price is coming to an end.”

QV’s May data has values in the Auckland region increasing by just 0.1% over the past quarter, leaving the region’s average value at $1,054,729. Further evidence of the region’s static value growth can be seen in a 0.1% year-onyear drop in values, once they were adjusted for inflation.

At the same time, new Trade Me Property data suggests that demand in Auckland is cooling. It shows that the average number of buyer views on Auckland properties for sale is down by almost 6% on May last year and by 20% as compared to May 2016.

Head of Trade Me Property Nigel Jeffries says these are signs the Auckland market is settling back to a more stable rhythm after years of frantic growth. “Auckland’s growth has been dramatic but that growth has finally died down and we’re seeing a more normal market with dips and fluctuations.”

But it’s not just the Auckland market that is taking it easy. QV general manager David Nagel says quarterly value growth across the Wellington region has also come to a virtual standstill. It dropped by 1.1% over the last quarter, leaving the average value at $633,759.

Quarterly value growth across the other regional centres of Hamilton (up 1%), Tauranga (down 0.9%) and Christchurch (up 0.1%) remains flat, he says. “With a lower expectation of capital gains, particularly in Auckland, we’re seeing people show less urgency when it comes to selling or buying property.”

QV’s valuers in these centres all highlight a general decrease in demand, a fall-back in investor activity, and a slowing of growth in their respective markets.

The May data from REINZ was more positive on the Wellington front. It shows year-on-year price growth of 8.0% in the Wellington region, but prices were up on April by just 1.2%. This left the median price at $567,000. But, like QV, it records a pattern of moderating price growth in Hamilton, Tauranga and Christchurch.

Star Performer: Dunedin

However, there is one star performer among the main centre markets. In both the QV and the REINZ data, Dunedin is the only main centre to buck the flatlining growth trend.

According to QV’s data, values in Dunedin continue on an upward trend. They went up by 4.0% over the past quarter and by 9.4% in the year to May, leaving the city’s average value at $408,827.

QV’s Dunedin spokesperson Aidan Young says the market is robust, with entry-level prices comparatively low, all property types selling reasonably quickly if priced right and multi-offer scenarios common-place.

“As we approach the usual winter slowdown period, I’d anticipate that the amount of property listings will drop. But, with demand showing no signs of dropping significantly, values should still steadily grow or at least hold their value.”

Likewise, the REINZ data shows that Dunedin’s median price was up by 15.2% year-on-year to $409,000 in May. This was also a 2.2% increase on April’s median price.

REINZ’s Otago commentator Liz Nidd says that rental returns remain high which is keeping investors interested in the Dunedin market. “Properties that are in demand still attract many attendees at open homes, and ‘home and income’ properties are incredibly sought after.”

Regions Strong But Slowing

Meanwhile, that oft-cited regional lag remains firmly in place and regional markets across the country continue to perform strongly – for now.

QV’s data shows that growth in regional New Zealand is continuing, with Napier, Hastings, Invercargill and Whangarei turning in particularly strong results.

‘We expect the market to cool further as more of the government’s policies designed to slow the housing market move into practice’ DOMINICK STEPHENS

But Nagel says that even these provincial towns are showing signs that the growth observed in the past few quarters will be difficult to maintain. “With interest rates due to remain stable coupled with increasing costs faced by investors, I would anticipate the current trends will remain mostly the same over the coming months.”

Again, the REINZ data provides a rosier picture. It shows that three regional markets reached record high median prices in May. They were Northland (up 6.7% year-on-year to $475,000), Tasman (up 16.2% year-on-year to $612,000), and Manawatu/Wanganui (up 11.9% year-on-year to $305,500).

Norwell says that of the country’s 16 regions, 13 saw year-on-year price increases. “Five of which were double digit increases showing that the demand for good property continues unabated and highlights the buoyancy of the housing market across the country.”

Trade Me Property’s May data also has regional markets performing strongly. It has six regions reaching record asking prices. Hawke’s Bay was the standout performer: it’s asking price was up by 17.9% year-on-year to hit $534,850.

But Jeffries says Marlborough, Taranaki, Northland and Bay of Plenty also all had solid price rises. “Anecdotally, we’re hearing of more and more people looking to the regions for a better worklife balance so it’s not surprising that we’re seeing areas like Marlborough, Hawke’s Bay and Northland becoming very popular with Kiwis.”

Outlook Moving Forward

Among market commentators the general school of thought is that, regional variances aside, the national market is slowing down and stabilising.

Westpac chief economist Dominick Stephens points out that behind the headline price rises in the REINZ data there are marked differences across regions. The slowdown in the housing market has been most keenly felt in Auckland and, to a lesser extent, Canterbury, he says.

“Outside of Auckland, house prices rose a touch in May, and are up 6.8% on a year ago. But even that’s still a much more gradual pace of growth than we’ve seen in recent years. A year ago, annual house price inflation outside of Auckland was running at a rate of 11%, and two years ago it was almost 16%.”

The housing market’s trajectory in recent months has matched their expectations that the changing policy backdrop would be a significant drag, Stephens says.

“Looking ahead, we expect the housing market to cool further as more of the government’s policies designed to slow the housing market move from the drawing board and into practice. Combined, these policy changes, along with a gradual rise in mortgage rates and slowing population growth, are likely to see annual house price inflation fall to 0% by the end of the year.”

For ANZ chief economist Sharon Zollner, the factors that have been dampening house price inflation (investor caution, credit availability and affordability constraints) are expected to be continuing headwinds. But strong population growth and pent-up demand remain supportive while interest rates also remain low, she says.

“We expect that demand will continue to be robust outside of Auckland, supporting nationwide house price inflation, while the Auckland market remains subdued. In previous cycles, regional catch-up has taken a long time to play out, so this dynamic may be a persistent theme.” Their current forecast is for stability in the housing market but they suspect there could be some bumps in the road ahead, Zollner says.

“We expect that offsetting forces will continue to balance out, leading to stability in house sales and gradually moderating house price inflation. But we acknowledge that stability cannot persist indefinitely – and a change in conditions could easily tip the balance in either direction.”