Property Report: Volatility reflects uncertainty in market

The latest round of lending restrictions by the Reserve Bank have taken some heat out of the property market. Photos/Supplied

As anticipated, the latest round of lending restrictions announced by the Reserve Bank in late July have taken some heat out of the property market.

Let's consider listings first. For a week or two after the announcement there was a surge in new listings. While slightly earlier than usual, I am putting that down to a normal spring seasonal lift.

But it was brief, and the next couple of months were much weaker than they should have been for that time of the year, right across the country.

Then, rather unexpectedly, new listings picked up again in early October, and in the last few weeks have been at the highest level we have seen for a few years.

It would seem that people needed a couple of months to work out what the lending restrictions meant for them and, rather than listing in August or September, are doing so only now.

Despite this late surge in new listings, the number of properties for sale remains low across the country.

Another weekly series that we track is our index of buyer demand, based on the number of electronic valuations ordered by banks of behalf of their customers. Like listings, this briefly jumped after the RBNZ announcement.

This was likely people worried that they may not be able to still get lending to help with their purchase plans. What has followed has been a low level of buyer demand across most of the country. In the top half of the North Island the buyer demand has been at or below what it was in mid-winter immediately before the announcement.

Usually the demand would have been steadily increasing throughout spring. Across the rest of the country the demand is higher than mid-winter but still below what you would expect for this time of year.

The new lending restrictions targeted investors by requiring a 40 per cent deposit.

According to our latest buyer classification analysis the share of sales going to investors has held firm so far. There continues to be a decline in the share of sales to people moving house, while first home buyers are also holding firm.

We are now seeing some effect of the reduced demand on values. When I compare the rate of value increase over the past three months to the three months before that, many parts of the country have slowed.

This slowdown is most pronounced in the top half of the North Island, but has been less so in Wellington where some suburbs further out of the city have continued to ramp up in value.

Speaking of Wellington, the Kaikoura earthquake events have caused considerable damage to dozens of building in the CBD.

As further engineering inspections are carried out, more buildings are being deemed unsafe and will not be inhabitable until repaired which will be many months in most cases.

Some buildings are so badly damaged that they will need to be demolished. What that means for the people working in those buildings will vary from case to case, but for the time being uncertainty is the word of the day.

While there is little to no damage to residential properties in the Wellington area, there has been a freeze put on new insurance policies from Selwyn District and Westland District in the South Island right through to Kapiti Coast and Masterton Districts in the North Island.

People buying a house in these areas can take on only the existing owners' insurance policy and cannot raise the level of cover.

Again, this will cause uncertainty for potential buyers and sellers and will likely slow down activity.

Uncertainty is likely to see a volatile property market for the next few months at least.