Homes & Relocation Detail
The New Zealand property market
Jo-ann Hodgson takes a look back at what defined the New Zealand property market in 2007 and asks the experts what the rest of this year is likely to bring
According to the Real Estate Institute of New Zealand (REINZ), annual median price growth rates slowed just gradually enough to avoid eroding values at the end of 2007. The national residential property market finished the real estate year in November up 6.66 per cent, compared to the annual growth rate of 10 per cent the year before.
REINZ National President Murray Cleland commented: "That levelling off was important to the market in 2007 because despite the many predictions of a market decline, the market always enjoyed sufficient demand from buyers and confidence on the part of sellers that neither party was prepared to trigger any wholesale reversal in the trends built up over the last seven years." He continued: "Various factors influenced the market, including reduced immigration on previous years, rapidly rising new home construction costs and higher mortgage interest rates, but values held up despite a year of considerably reduced sales volumes, compared with the boom 2003 to 2006 period."
New Zealand property prices remained pretty flat in 1998, 1999 and 2000, over which period national median prices increased from NZ$168,000 to NZ$174,000. However, during 2002 values took off and by the end of the year the national median residential price had shot up to NZ$195,700. The next three years also saw the national median price increase significantly, jumping from NZ$235,000 to NZ$330,000. "This year the increase is still significant, from NZ$330,000 to NZ$352,000, but the lower percentage increase is indicative of the market flattening out and finding its own level," said Clevland. Somewhat unexpectably, Gore, in Southland, was the fastest growing town in 2007, finishing the year with a record 42.58 per cent increase in its median price, from NZ$128,000 in November 2006 to NZ$182,500 in November 2007.
In second place was Gore's near neighbour Invercargill, up 23.21 per cent from NZ$168,000 to NZ$207,000. A predominent feature of the recent property cycle was that many cities and their immediate suburbs experienced strong growth in values at an early stage, while in the latter part of the cycle buyers began to look further out for cheaper prices. In the year to November 2007, Southland was the leading region, with its median up from NZ$155,000 to NZ$209,025, an increase of 34.85 per cent. Second was the Manawatu and Wanganui region up 9.62 per cent from NZ$208,000 to NZ$228,000, with Central Otago Lakes in third, with a 9.55 per cent increase from NZ$392,500 to NZ$430,000. Canterbury and Westland region was fourth at 8.46 per cent with a median up from NZ$289,500 to NZ$314,000 while Northland was in fifth place with a 7.89 per cent increase from NZ$285,000 to NZ$307,500.
Following Gore and Invercargill in the list of ten greatest median price growth figures in 2007 for provinces, cities and towns, was the Wairarapa, up 25 per cent, then the West Coast, up 21.29 per cent, North Canterbury up 21.12 per cent, Timaru up 15.12 per cent, Tauranga up 15.44 per cent, Whangarei up 15 per cent, Wanganui up 14.97 per cent and Palmerston North up 12.69 per cent. Property market experts have also noted a change in market dynamics towards the end of 2007, which will continue to affect the market in 2008. "There are now an increased number of properties on the market for buyers to choose from and this is likely to continue to impact the residential housing market throughout 2008," says Chris Jones, General Manager at Bayleys Real Estate. He continues: "We are finding that motivated vendors are still achieving a sale of their property in a reasonable time frame providing they are prepared to meet the market in terms of buyers' price expectations."
Although the credit crunch and poor stock market performance is due to affect New Zealand's financial market this year and there remains talk of possible further interest rate increases, Jones states that there are many positive aspects to the property market. "We are continuing to see strong demand for 'unique' properties and there may also be investors cashing out of share portfolios to lock in profits and returning to the real estate investment market looking for better long-term returns," he says. "We will, of course, undoubtedly see a series of tax changes announced in the lead up to the election that later in the year may improve consumer confidence towards the back half of the year and heading into 2009." To those looking to sell their New Zealand property this year, Jones advises: "Be very clear on your reasons for selling and listen to what the market is telling you during the marketing process. And to buyers: "Although it is true you will have an increased choice of options in 2008 don't forget that there are still other buyers out there looking for good property also – so once you find 'the one' you really want, don't wait too long before putting in your offer!"
While the market most certainly has flattened out over the last year, and this trend is likely to continue in 2008, there are many positives to be found within the New Zealand property market and things are looking good for buyers.