21 Oct NZ property values grow outside Auckland – Peter Bromley
Core Logic New Zealand has released its analysis of the market there and it shows a slowdown in the Auckland landscape but a staggering improvement in some major regional areas. We ask Core Logic’s Peter Bromley for his insights.
Kevin: We take an intense interest in what’s happening in the New Zealand property market. Joining me to talk about that, Peter Bromley. Peter is the general manager, sales and marketing CoreLogic New Zealand. Peter, thanks for your time.
Peter: Thanks very much.
Kevin: Interesting report out from CoreLogic showing that prices have come back just a touch in Auckland. How’s the mood in the market in New Zealand right now, Peter?
Peter: Yeah, you’re right. So in terms of general aspects, Auckland values have continued to be more plateauing, and that’s been the case for two years, but there’s still some growth in other centres, particularly around Wellington and Dunedin, where listings on the market have remained pretty much at low levels. So lots of interest in those, and obviously when you look at the price point to Auckland, there’s obviously much more affordability in terms of buying in those areas.
Kevin: Yeah. Average value. Is that a median? In Australia, we call it a median. Is it an average value in New Zealand? It’s over $1 million dollars in Auckland.
Peter: Yeah, it is. It is an average value. It’s one of the things that’s different to Australia, but the average value at the end of August was just over $1 million in Auckland. Whereas in places like Wellington, it’s 770-odd thousand dollars. In places like Dunedin it’s 415. So if you look at that affordability when incomes are probably not even as high as 90,000 in some of those places, it makes it a much more realistic prospect to buy in those areas rather than Auckland.
Kevin: Yeah, Christchurch market still seems to be a little bit depressed. It’s probably one of the lowest average values in the country, in terms of a cap city anyway, just a touch under 500,000.
Peter: Correct. And there’s still massive rebuilding to go on down there and lots of change. So it’s one of those things you’d expect in such a beautiful city.
Kevin: Hamilton. Correct me if I’m wrong, but the Hamilton market, it’s quite a big north island city too, it’s been a little bit slow. This increase last month, 2.3%, it’s a bit of a turnaround, is it?
Peter: It looks like that, but again, and I always say with any one quarter just to be a bit cautious, and when I talk to the research guys I give them the same advice. So you’d want to see what happens over the next quarter, two quarters, and we’re moving into spring, so it’s a nice part of the country. So you might actually see a little of a tick up there.
Kevin: Wellington seems to be going quite well. The annual increase there has been 8.5% and even fairly solid last month at 2.1% as well.
Peter: Yes, that’s right. And I think that’s … Again, it’s indicative of … It’s still got some strong prospects, some employment growth down there obviously with a lot of the government sector there and again comparable to Auckland in terms of the actual value of a property. It’s still attractive and again, it’s a nice city. It’s got a great harbour. When you talk to people from Wellington they really buy into it and so it’s got a really strong culture around it.
Kevin: KiwiSaver seems to be getting some fairly good press as well and good reports also out of New Zealand with first home buyers. How does KiwiSaver work?
Peter: That’s one of the things is holding up. I think some of the first home buyer market and it’s important that I think we see how that continues to trend. My time here, it’s one of the things I’m working with to understand more, those drivers for KiwiSaver. But from what I see and what our research guys tell me, it’s one of those things that helps encourage first home buyers.
Kevin: Yeah, indeed. And it’s obviously having some good impact too. Might be some lessons there for other parts of the world to learn from as well. What about investors? Can we just turn our focus to them for a moment? Because we’ve spoken in this show in the past about the legislation recently introduced by the government there that was trying to put a bit of a dampener on overseas investors. What impact are you hearing that’s having on the market, if any?
Peter: So from an investor market it’s interesting. If you take it at a very high level, it’s still fairly buoyant, and in fact if you look at the investment market, the alternative, those that have taken mortgages this quarter versus previous quarters. So 24.4% of mortgages in this last quarter was from investors as opposed to in the previous quarter and quarter two this year, 23 and 22 in quarter one. So there’s still a fairly strong activity in the investment market. The government changes that go through this year will certainly … Obviously they’re designed to do some change around the Tenancy Act and obviously in terms of regarding rent rises and eviction periods and also the negative gearing changes, but overall you’re not seeing a mass exodus at all in that investor market. I think from the overseas buyers, though, you’ll see some potential impacts, maybe in Auckland, where they’ve obviously focused more, and obviously in places like Queenstown Lakes District, you’ll see some as well. So I think that’s still to be seen in those particular areas of where overseas investors might change their thinking.
Kevin: Yeah, and it’s likely that’s going to be more longterm too because that type of investment is pretty much centred around the unit and that impacts the construction market as well. So there might be a bit of a lag time, Peter, do you think?
Peter: I think so. And again, just as a sort of one of the things we’re not doing here in New Zealand is building enough new stock. And I think that’s one of the things that will still keep prices in many cases fairly solid in terms of that and not see any major changes.
Kevin: Is that right across New Zealand or are there any markets that are suffering more than others in terms of lack of stock?
Peter: Even the Auckland market. Some of the things I’ve started to understand here since I’ve been here is we built last year, I think, 11,000 new properties, but one of the things that you’ve got to look at is net new growth in new property. So you might build 11,000 new properties, but you have to knock down 5,000 to get those 11,000. And I think one of the things is actually how we build better stock and then in the right places. And I think one of the other things is how that then is supported by the right infrastructure that goes with it. So just simply building a whole bunch of new homes in a new area doesn’t really work well for the whole social environment if you don’t have the right infrastructure around schools, transport, and how long it takes to get to work is a real critical part, I think. And I know New Zealanders are now really looking at that.
Peter: I was fortunate to be at a launch last night for the Property Foundation, which is some work done by a lot of industry working with Massey University and they’re taking some of the lessons that have been overseas, and seeing how you make sure that you build your new stock in the right way and support with the right infrastructure, be it transport, be it schools.
Kevin: Yeah. No, very good. Good insight there too. Peter, I want to thank you very much for joining us and giving that. We’d like to get a fairly regular update on that New Zealand market because it’s very close to what we do in Australia as well. Peter Bromley has been my guest. Peter is from CoreLogic in New Zealand. Peter, thanks for your time.
Peter: Thanks very much for having me.