Whether it’s tea leaves in the bottom of your cup, the behaviour of the birds, or the slightly hesitant tap of a gavel; the property market is trying to tell us something. The folks at Quotable Value (QV), who trust plain old numbers, are saying Auckland’s prices are declining, while NZ’s in general, are slowing. PM Ardern’s decision to bury any plans for a capital gains tax could be a stroke of clairvoyance.
So, to the data… The price of an average Auckland residential property just fell in April — the fifth month in a row — to $1,033,583—1.5% less than 12 months ago. Auckland’s major districts were mostly down, with the exception of static Franklin, and Manukau—up 0.75% now, but still down 0.3% since January. Biggest losers were Coastal North Shore, down 3.4% and North Harbour, down 5.7%. For optimists who seek silver linings—at least Auckland’s decline is a smooth, downstream cruise, not a bungee jump to the bottom.
Average prices are still rising in most centres. But again, more tortoise and less hare. In April, Whangarei— our northernmost city—had an average price of $542,715, up 5.0% from April 2018. But, that’s down from 5.5% in the 12 months to March, 6.1% to February and 10.1% to January. Queenstown, New Plymouth, Hastings, Napier, Nelson, Wellington and Lakes followed a similar route. Could Auckland be the canary in the coal mine?
Christchurch is not really doing anything. Up 1.3% compared to a year ago, but just 0.1% since January. Average April values are down in Ashburton, but unchanged in Waimakariri. Perhaps, more telling is the big picture… NZ’s annual rate of price growth dropped from 7.6% in April 2018 to 2.7% in April this year.
So, what does the future hold? In a word, headwinds. More cautious banks mean less available credit. In fact, a credit squeeze may be unavoidable. Final submissions on the RBNZ’s proposal to increase minimum bank capital requirements by $13-$16 billion, were due by 17 May. ANZ, National Australia Bank and Westpac learn their fate in September. The fortunes of others in the property market will be revealed soon after. And, basic maths tells us that people who turn up to auctions with less money, will pay less money.
Meanwhile, less buyers also keeps prices down. Specu-vesters are getting skittish. Gathering storm clouds suggest to them, better yield possibilities elsewhere. On top of that, NZ housing prices have rocketed up in recent years, creating affordability constraints that limit both new developments, and the number of buyers. And, don’t forget the doomsayer buyer. They’ll wait, with their black cats and broken mirrors, for an even bigger market correction, and only then will they give in to their itching left palms.
BNZ, ASB and Westpac have followed ANZ and Kiwibank into an unknown portal. They will also cut mortgage rates, since the RBNZ’s decision to drop the official cash rate from 1.75% to 1.5%. It’s a record low and puts us equal with Australia.
All this signals that a serious buying opportunity might be fast looming for your clients. The time to strike is near! If I can help with finance, or more insights into emerging trends, don’t hesitate to reach out.