Regional NZ roars into 2020

 

The property market continued to pick up steam during the year to finish the decade with a roar. 

Buoyed by low interest rates and squeezed by shortage of housing stock, the end of 2019 was marked by very strong price growth in regional markets and Auckland emerging from its slumber. 

Price records tumbled frequently around the regions and despite low inventory,  sales volumes in December hit a three year high reinforcing the energy in the market. 

As price growth, particularly in the regions out-paced income growth housing affordability again began to wane, with Demographia's annual housing affordability survey reporting the median house price now stands at 7 times the median income – up from 6.5 the year before, this is compared to 6 in Australia. 

Predictions by most economists and market commentators is for more of the same in 2020. 

Volumes

Despite a lack of inventory and difficulty in securing listings, volumes for December were up 12.3% on the same time in 2018, marking the highest December sales in 3 years. 

Auckland's numbers were even more impressive up 31.7% year on year for December to 1860, the highest number for that month since 2015. 

Looking at who was hot and who was not in terms of sales volumes, it is a pretty one sided affair with all but 4 regions notching increases from December 2018. 

Selling more 

• Bay of Plenty up 21.5% on 2018 and the highest December number in 4 years;
• Southland up 18.3% on December 2018;
• Northland up 17.3% on December 2018;

Selling less 

• West Coast down 43.5% on December 2018 and the lowest monthly sales figure since April 2017; 
• Gisbourne down 18.5 % on December 2018 to their lowest December in 5 years;
• Manawatu/Wanganui down 14.2% on 2018 to their lowest December level in the month of December for 5 years. 

A key issue which could keep a lid on sales volumes  is the dwindling number of new listings, now sitting nationally at under 20,000. This is a far cry from just under 60’000 in 2008. Given strong population growth and demand for housing, this shrinking pool will generate continued upward pressure on asking prices. 

Values

Whatever measure you look at the trend is clearly upward. 

The REINZ reported the median house prices increased 12.3% from December 2018 to $629,000, with all regions bar the West Coast seeing rises and Auckland hitting it's highest mark in 33 months. 

Realestate.co.nz in December reported the average asking price at $703,780 up 3.4% on November and the highest since their records began 13 years ago. 

Corelogic's QV December House Price Index was up 0.9%, with the annual rate of increase sitting at 4.0%. The quarterly growth rate of 2.7% was the highest since November 2016 when the RBNZ introduced it’s final round of tighter LVR restrictions. 

And finally the HPI, increased 6.6% year-on-year, and now sits at a new record of 2,915.

Notable increases

• Southland had another big jump finishing 2019 strongly with a new record high median house price and a 32% increase on December 2018. 
• Manawatu/Wanganui was up 27.8% to a new record median price of $402,500
• Gisbourne jumped 21.3% on December last 2018; 

Decreases 

• Just the West Coast with a 13.6% fall on last December to $190,000 saw a decrease in median price. 

Days to sell

Given the strong demand and decreased number of listings it's no surprise the trend is downwards here. 

Nationally the time to sell fell 2 days from November 2019 and a 4 days year on year to 31 days. 

Southland led the pack again with the lowest days to sell of all the regions at 21 days. Northland had the highest median number of days to sell at 45. 

Rents

Limited stock continues to put pressure on rental prices which have been tracking up solidly all year. 

Decembers Stats NZ numbers showed: 

The stock measure of rental property prices increased 0.3% from November to December and 3.4% year on year; 

The flow measure of rental property prices increased 0.7% from November to December and 3.5% year on year. 

After a period of gains however, rental yields are now falling in many areas as house price rises outstrip rental increases according to the Interest.co.nz’s Rental Yield Indicator. 

Where to now?

Bank economists continue to ramp up their house price inflation predictions adding weight to the belief that 2020 will see ongoing property market strength, driven by a shortage of supply, an economy which is still growing albeit slowly and low interest rates. 

Key questions to ponder as we head deeper into 2020 

• Westpac is predicting 7% and ANZ 8% house price inflation. Will housing affordability and election uncertainty temper price rises at all or will 2020 see the strong levels of growth predicted? 
• Residential building consents have hit a 45 year high, which should begin to alleviate under supply in some market segments when these dwellings are complete. The Government has also quietly increased the debt limit of SOE Kāinga Ora from 2.5 billion to 7 billion dollars to try to increase housing supply for low income earners and deal with other increased costs. Will we start to see an upturn in inventory numbers as a result, or will strong population growth eclipse the gains? 
• Advisers are calling for servicing rate changes due to the continued low interest rate environment. Servicing rates with some major lenders can be close to double that of actual lending rates, this test counts out many low to middle income earners. Will lenders take head or will rates remain stubbornly high?
• What will happen with the LVR’s, despite a recent loosening, some commentators are picking the RBNZ could tighten LVRs if things get silly price wise, will we see a reaction if house price inflation hits forecast predictions?  

As always, I will continue to keep a finger on the pulse of the current and future economic climate, to keep you up to date with the things that are impacting the lending landscape so you can better advise your clients. If you’d like more information, on anything I’ve covered, please don’t hesitate to get in touch.