This is an excert from QV in their montly reports.
2008 has been a pivotal year for the NZ property market with a sustained drop in property values for the first time since 1998. QV’s December Residential Price Movement report shows property values fell by 7.4% during the year.
“Property values held reasonably flat through the first three months of the year, but the decline kicked in through the autumn and winter months, during which time values dropped 6%. With the significant drops in interest rates over the past three months, there has been an increase in market activity and values appear to be flattening again” said Mark Dow of QV Valuations.
“To keep 2008 in perspective it’s useful to look back at the activity of the past two decades. Property values grew by 120% between 2002 and mid 2007. By way of comparison, the last period of sustained growth occurred between late 1992 and the end of 1997 when property values increased by 54%” said Dow. “After such a period of sustained growth it’s inevitable that we will see a correction. The question remains how long this period of falling property values will continue.”
“It’s also interesting to look at the types of properties selling at the different stages of the property cycle. Between 2000 and 2003 the number of house sales more than doubled, with a dramatic increase in the proportion of lower value property selling. In the years 2004 to 2007, the number of house sales remained fairly steady, as did the proportion of low, medium and high value sales. During 2008, the number of house sales fell dramatically and the proportion of lower value properties selling significantly decreased. This pattern reflects the wider drivers of the property cycle. When the economy is strong; job prospects are good and immigration is increasing, then demand for houses, particularly first homes, pushes prices up. As the economy weakens and affordability becomes a real issue, first home buyers are usually the first to suffer; sales volumes drop and activity in the market moves back to mid to higher end properties as we saw through 2008” said Dow.
Our December report showed a 7.4% decline over the past year (calculated over the three months ending December 2008 in comparison to the same period last year) while the average New Zealand sale price for December increased slightly to $378,605.
All the main centres showed further declines in property values. In the Auckland Area values dropped back to -8.0% from the -7.4% reported in November. Hamilton values fell to -9.3% from -8.5%, Tauranga to -9.0% from -8.4%, and the Wellington Area to -6.9% from the -6.0%. Christchurch and Dunedin followed the same trend dropping to 8.0% and -7.7% respectively.
Most of the main provincial cities followed the national trend with property values easing further. Whangarei dropped 8.6%, Napier 8.1%, Nelson 7.6%, and Invercargill 9.1%. However, a number of areas bucked the trend most notably popular summer destinations like Queenstown whose property values dropped to 10.6% from the -12.5% reported in November, and Gisborne to 5.8% from 9.6% last month.
What’s happening in Christchurch?
I dont need to go on any further from this brilliant report that sums up 2008 in a very very good way. The bottom line is if you are selling you need to realise that your house is worth less than it was 1 to 2 years ago. Its a shame but it had to happen. Property prices got to high and you will not see them increase again till a few factors are measured and fixed. These been income levels coming up so that debt can be serviced on mortgage payments and also not until household debt falls.
This year will not be an easy one.