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House price madness probably slowing

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Wednesday, 11 August 2021

Eye-watering house price growth is probably past its peak – Sally Lindsay reviews CoreLogic’s recent HPI data.

According to CoreLogic’s latest House Price Index shows house prices rose by 1.8% over July.

Research head Nick Goodall says while the market is likely to be past its peak growth-wise, it could take some time to slow.

“The exceptional rate of growth following the economic recovery after the pandemic-induced lockdown was not sustainable.”

He says with an asset class the size of the residential property market, which now exceeds $1.54 trillion and remains attractive due to still-low interest rates, any slowdown was destined to be gradual.

“Despite some investors [being] unable or unwilling to remain active in the market, a strong pipeline of equity-rich investors, previously unsuccessful first home buyers and other owner-occupiers who remained patient are now taking this opportunity to seize on low interest rates before they lift any further,” says Goodall.

Slowdown apparent

Analysing the CoreLogic HPI quarterly change in values, the slowdown becomes apparent, with the nationwide growth figure dropping from 7.2% at the end of June to 5.9% at the end of July.

This trend of deceleration is also clear across almost all main urban areas.

Property values in Gisborne increased by 2.1% over the past three months.

This is the lowest quarterly growth rate since August 2020 (-0.2%) when uncertainty still remained regarding potential Covid-19 lockdowns.

And it is significantly lower than the 10.2% growth witnessed over the three months to the end of June 2021.

Other centres seeing a significant reduction in the rate of quarterly growth at the end of July include Kapiti Coast District (3.3%, down from 10.6% at the end of June), Rotorua (1.9%, down from 6.9%) and Napier (2.8%, down from 7.1%).

The only city to experience a lift in quarterly growth was Nelson, with 5.0% growth to the end of July. This was up from 4.8% for the three months to the end of June.

Meanwhile the annual growth rate in Whanganui exceeded 40% at the end of July, the fastest rate of growth since September 2005 when the average value was $165,000. The average value now exceeds $500,000.

While the quarterly change in values has started decelerating, the prolonged period of value increases over the past 12 months is still evident in the annual measure and current average value.

The 6.1% quarterly growth experienced in Hamilton is still strong. However it is a noticeable drop from the double digit increase in the three months to the end of June.

OCR lift

“It’s these measures, alongside other economic indicators which could provide the best read on what values do throughout the rest of the year and into 2022.

“Expectations of a lift in the OCR are increasing every day, and while higher interest rates on their own don’t tend to cause values to drop, the Reserve Bank will be mindful of the potential impact to highly indebted recent buyers,” says Goodall.

He adds, with the market still growing, albeit at a slower pace, this may give the Reserve Bank a level of comfort to lift the OCR without major concern of it having too negative an effect on values.

Read full article here: https://www.landlords.co.nz/article/976519053/house-price-madness-probably-slowing?utm_source=LL&utm_medium=email&utm_campaign=Landlords+Daily+News+for+11+Aug+2021

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