Signs of an Auckland property value slowdown

Property / NZ Herald

Jono Ingerson, research director at propertyIQ, says there are signs of a levelling off in Auckland property values.

For the past two years house prices in Auckland have been increasing. According to our latest House Price Index, values across the wider Auckland area rose 10.2 per cent in the past year to the end of January, and 5.1 per cent in the year prior to that. These increases, along with parts of Canterbury where house prices are lifting strongly because of the demand after the earthquakes, have been largely responsible for pushing up nationwide house prices. However, there are the first signs that the increases may be slowing down in parts of Auckland, and in places values have even slid back slightly in the past few months.

Looking at the statistics for Auckland suburbs over the past year, we have seen several suburbs where the rate that values are increasing has dramatically slowed. For example, values in Epsom, Grey Lynn, Mission Bay and Parnell had all previously been increasing strongly but began flattening off at various times throughout 2012. Mission Bay and Parnell levelled off earlier in 2012 and as a result you can see from the following tables in this Property Report that the annual increase in those two suburbs, at 5.4 per cent and 3.4 per cent respectively, is considerably less than most other suburbs.

This slow-down backed up some of the anecdotal evidence we were hearing that prices in some of the higher-value suburbs had steadied during 2012. This was in part attributed to the more rigorous rules being applied by the banks when lending for mortgages for these higher-priced properties. Due to the larger deposit required, these properties were now beyond some people who instead set their sights on properties worth under $1 million.

One way to look at the slowdown in value growth is by comparing the value change over the past three months to the value change over the past year. By annualising the value change over the past three months (by multiplying it by four) we can directly compare that rate of change to the actual annual change we saw over the past 12 months.

The suburb in the wider Auckland area with the greatest slow down is Westmere, where values over 2012 increased by 15.8 per cent. The increase in the past three months however was only 0.2 per cent. So, if that 0.2 per cent is annualised it represents a 0.8 per cent increase which is dramatically less than the actual 15.8 per cent annual change. Other examples of slowing values in the more central areas are Herne Bay (-0.1 per cent over the past three months compared to an annual change of 9.7 per cent), Mt Albert (1 per cent versus 13.6 per cent), and Remuera (0.2 per cent versus 10.5 per cent). Looking slightly further out and we can see that values in Clendon Park and Schnapper Point have dropped, and values in Castor Bay, New Lynn, Titirangi and Manurewa have nearly levelled in the past three months.

The latest statistics to the end of January seem to support the view that things may be slowing down. In the Property Report statistics to the end of December, 17 of the 44 suburbs in central Auckland had slowed in the past three months. Looking at the latest statistics to the end of January, 37 of those same 44 suburbs have shown a slow-down. Similarly, in North Shore 12 of the 35 suburbs showed a slow-down to the end of December, but 30 of those 35 slowed in the three months to the end of January.

As is often the case after the Christmas break, the property market can change direction depending on consumer confidence. By most accounts January was a strong month for buyer enquiry and sales, suggesting that the optimism we saw in December may flow into 2013. Although low interest rates and a lack of properties for sale have been suggested as reasons for the increasing values in Auckland, neither of these factors has changed much in 2013. This would suggest that perhaps the levelling off in values recently is more of a reflection of what people are prepared to pay for property in Auckland. The next few months will either confirm or deny if this slow-down is likely to continue or be temporary.