Residential property sales across the country took a steep dive in June. Sales dropped annually by 38.1 per cent from 7,629 in June last year to 4,721 as listings increased 89.5 per cent from 13,861 in June last year to 26,271. The sales count across the country, excluding Auckland, declined 35 per cent annually from 4,776 to 3,103. Only the West Coast, with +31 per cent had a month-on-month increase.

Those with the greatest annual drop were:

• Auckland, down 43.3 per cent annually from 2,853 to 1,618
• Bay of Plenty, down 41.3 per cent annually from 458 to 269
• Gisborne, down 39.5 per cent annually from 43 to 26
• Taranaki, down 39.4 per cent annually from 198 to 120.

Despite the sales slump the median price for houses increased 4.2 per cent annually last month, from $816,000 in June last year to $850,000. They were only up $10,000 from May ($840,000 to $850,000).

The median residential property price for New Zealand, excluding Auckland, increased 9 per cent annually from $680,000 in June last year to $741,000. There was a month-on-month increase of 1.1 per cent from $733,000 in May. The median price in Auckland increased 0.5 per cent compared to June last year, from $1,150,000 to $1,156,000. Auckland also had a month-on-month increase of 2.8 per cent, up from $1,125,000 in May.

Canterbury was the region with the strongest annual percentage growth in June. The median price in the region increased 22.1 per cent annually, from $565,000 to $690,000 for the June year. Waikato recorded an annual increase of 14.3 per cent, from $735,000 to $840,000.

Four regions showed an annual drop in median price. Wellington was down 4.2 per cent from $885,000 in June last year to $848,000, with one showing no movement and only South Wairarapa increasing.

Hawke’s Bay was down 1.4 per cent from $700,000 to $690,000; the median price in Manawatu/Whanganui dropped 1.1 per cent from $581,200 to $575,000; and Taranaki saw a marginal decline of 0.2 per cent from $576,000 to $575,000 over the same period.

The House Price Index showed an annual increase of 0.7 per cent from 3,843 in June last year to 3,870, but it is the seventh consecutive month it has dropped from its 9.5 per cent peak in November.

Portfolio Questions

For investors, facing a more heavily regulated market and the full force of inflationary pressures, buying is becoming harder to stack up.

Property values fell again in June, the third month in a row they have declined 0.8 per cent, CoreLogic’s latest index shows.

The quarterly fall of 2.3 per cent is the biggest drop over a three-month period since February 2009, which was just before the market bottomed out following the global financial crisis (GFC).

Given the hurdles to get funding such as 40 per cent deposits, increasing interest rates and the cost of housing such as values, maintenance costs and reduced tax, many investors, or would-be investors, simply won’t be able to justify adding a property to their portfolio, says Nick Goodall, CoreLogic’s head of research.

A recent Infometrics report forecast the average annual growth rate of house price appreciation for the next 25 years to be 3.1 per cent a year. For context, the lowest 25-year average from the past 70 years was 6.4 per cent (1988-2013).

When it comes to yield on investment, Goodall says increasing rental payments may have helped keep up with some of the rising costs of investment property ownership. However, it’s likely the rate of rental growth will drift back from more than 6 per cent towards the long term average of 3-4 per cent a year.

A big turnaround has hit the previously buoyant residential rental market. Across the country the number of properties listed for rent surged 12 per cent to an all-time high year-on-year in May, according to Trade Me’s latest rental price index, but demand fell 8 per cent.

There were significant regional differences in those figures. Wellington’s listings lifted 45 per cent, followed by Marlborough at 24 per cent. Auckland was at 6 per cent and Manawatu/ Whanganui 5 per cent.

However, listings in Northland, Waikato, Hawke’s Bay, Taranaki, Nelson-Tasman, Otago and Southland dropped compared with a year ago, while there was no change in Canterbury.

All regions apart from Canterbury and Southland had a drop in demand from prospective tenants, with the biggest declines in Nelson/Tasman, down 28 per cent; Northland, 19 per cent; and Taranaki 15 per cent.

Southland (up 8 per cent) and Canterbury (up 21 per cent) were the only regions to see demand for rentals climb when compared with May last year.

The rental market is mirroring the property for sale market in May, with nationwide supply up 48 per cent year-on-year, while buyer demand dropped 9 per cent.

Rent Adjustments

In May, the national median weekly rent fell by 1 per cent, when compared with April to $575.

This marks the first month-on-month drop this year, and is $5 less than the all-time high national median weekly rent recorded in April.

However, when compared to the same month last year, May’s median weekly rent marks a 7 per cent rise.

Waikato was the only spot to see a new all-time high median weekly rent in May, reaching $525. The biggest year-on-year rises were in Taranaki (up 16 per cent) and Northland and Southland (both up 11 per cent).

The Auckland region’s median weekly rent was $600 for the second time, increasing by 2 per cent year-on-year. When compared with the region’s record-high median weekly rent recorded in January, this marked a slight drop of $10 per week.

In the Wellington region the median weekly rent rose 3 per cent year-on-year to reach $615 in May. When compared with the month prior, however, this marked a drop of 2 per cent for the region.

Average home values across the country have dropped more than $52,577, down 4.9 per cent since the beginning of this year, according to QV’s latest House Price Index.

In Auckland the drop in average values of $99,227 is almost double that of the rest of the country. The percentage drop is 6.4 per cent.

Over the three months to June QV’s HPI shows the average value of all New Zealand homes is now sitting at $1,011,188, dropping 3.4 per cent, while in Auckland the average value is now $1,441,941, falling 4.1 per cent over the three-month period.

‘Canterbury was the region with the strongest annual percentage growth in June’

These values still show 7.2 per cent and 7 per cent average annual growth respectively, but down on the 10.5 per cent and 9.9 per cent growth in May.

QV’s data shows Wellington and Napier had the biggest three-month value drops with falls of 6.6 per cent and 5.4 per cent respectively. Nelson and Hamilton, at 5.2 per cent and 4.7 per cent reduction in values respectively, are not far behind.

Queenstown High

Only one of the 16 major urban areas QV monitors has shown an increase in three-monthly house price value, with Queenstown-Lakes defying the downward trend with 1.9 per cent home value growth for the quarter.

QV general manager David Nagel says just six months ago the national market was tracking at just under 30 per cent value growth a year. This has fallen back quite dramatically, down to single figures, with further drops inevitable over the coming months as the home value correction continues.

Despite property for sale listings swelling and demand dwindling, consents issued for new dwellings eased just 0.5 per cent in May.

Just over 51,000 new houses were consented in the 12 months to the end of May, Statistics New Zealand figures show. This was up 17.3 per cent compared with 12 months to the end of May last year.

The most popular housing for new consents are stand-alone properties, with 24,536 consented in the year to May. Coming in behind are townhouses, also known as terraced housing, with 19,656 consented and apartments, with 4,037 consented.

Most of the growth in building consents came from townhouses and units, with numbers up 47.7 per cent in the year to May while growth in stand-alone houses was at 2.1 per cent for the year.

The total value of all building work consented in the year to May was $31.4 billion, up 19.5 per cent on the previous 12 months.

Of that, new houses accounted for $20 billion (up 23.6 per cent), structural alteration work to residential buildings another $2.5 billion (up 15.1 per cent), and commercial and industrial building work another $8.9 billion (up 12.3 per cent).

Westpac senior economist Satish Ranchhod says while the number of new houses being consented has charged higher in recent years, actual building activity has risen more gradually.

“That means residential construction activity is set to remain strong for some time yet. However, conditions in the construction sector are changing, and the peak in the cycle is coming into clearer focus,” he says.

“The economic incentives for developers are looking different. House prices are declining and the economic outlook has become more uncertain, while at the same time materials and labour are in short supply, and the costs for builders, including financing, have skyrocketed.”

New Mortgage Lending

After plunging in April, new mortgage lending rose 20.4 per cent, up $1.2 billion to $6.8 billion in May.

However, compared to May last year, new lending was down 23.6 per cent by $2.1 billion, Reserve Bank data shows.

Investors borrowed $1.1 billion, an increase of 16.7 per cent from April. First home buyers were lent $1.2 billion, an increase of 18.8 per cent and owner-occupiers borrowed $4.4 billion, up 22.3 per cent.

New commitments to investors dropped 26.7 per cent from May last year, while new lending to first home buyers dropped 29.3 per cent and owner-occupiers by 20.8 per cent.

The market share to investors declined for the third consecutive month from 17.1 per cent in April to 16.6 per cent in May, while first home buyers’ share dropped from 18.5 per cent in April to 18.2 per cent and, bucking the trend, the owner-occupiers’ market share increased one per cent from 63.2 per cent to 64.2 per cent.

The average value of new mortgages was $408,375 in May. This rise continues the trend for higher mortgages, rising 0.5 per cent from April and 24.1 per cent from the same period last year.

Nearly 17,000 new mortgages were taken out in May, an increase of 19.8 per cent from April, but the second-lowest number during May since data collection began.