CORELOGIC NEW ZEALAND MONTHLY PROPERTY MARKET & ECONOMIC UPDATE JANUARY FEBRUARY 2017
About CoreLogic 4 CoreLogic Data and Analytics 6 Legal Disclaimer 7 Macro Economic and Demographic Indicators 8 New Zealand Asset Classes 9 New Zealand Population 10 Migration 11 Regional Building Consents 12 Population Growth Compared to Building 13 Consents Buyer Confidence 14 Employment 15 Interest Rates and Mortgage Debt 16 Housing Overview 18 Values 19 Sales Volumes 20 Rent 21 Market Activity 22 Valuations Completed 23 Listings 24 Buyer Classification 26 House Price Index 27 Main Cities Housing Market Indicators 30 Auckland Values 32 Current Auckland Suburb Values 33 Auckland Suburb Value Change 34 Buyer Classification - Auckland 36 Hamilton Values 38 Buyer Classification - Hamilton 39 Tauranga Values 40 Buyer Classification - Tauranga 41 Wellington Values 42 Buyer Classification - Wellington 43 Christchurch Values 44 Buyer Classification - Christchurch 45 Dunedin Values 46 Buyer Classification - Dunedin 47
About CoreLogic CoreLogic is a leading property information, analytics and services provider in the United States, Australia and New Zealand. CoreLogic helps clients identify and manage growth opportunities, improve performance and mitigate risk, by providing clients with innovative, technology-based services and access to rich data and analytics. Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, currency or completeness of the data and commentary contained in this publication and to the full extent not prohibited by law excludes all loss or damage arising in connection with the data and commentary contained in this publication. 4
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CoreLogic Data and Analytics CoreLogic Buyer Classification A unique and flagship product to CoreLogic, Buyer Classification determines the type of buyer for every purchase of property based on their current and previous ownership of NZ property. Created at a record level, this can be matched to other datasets or summarised at any geographic area. Our buyer classification is used by financial institutions and Government agencies at both record and summary level and overlaid with their own data to assist strategic, policy, compliance, risk management and marketing decisions. CoreLogic value measures CoreLogic has a suite of products to measure property prices. This ranges from simple market measurements such as median or average sales prices through to stratified medians, various house price indices, and valuing groups of properties using Automated Valuation Models such as E-valuer. The house price indices are available both quarterly for completeness and monthly for reactivity. The Quarterly CoreLogic House Price Index has been specifically designed to track the value of a portfolio of properties over time and is relied upon by New Zealand regulators and industry as the most accurate measurement of housing market performance. These value measures are available for long time series and for either standard or custom geographic areas and property types. Suburb scorecard Detailed housing market indicators at suburb level, with data either in time series or current snapshot, and segmented across houses, flats and apartments. The Suburb Scorecard data includes key housing market metrics such as median prices, median values, transaction volumes, rental statistics and market metrics such as median selling time. If you would like to know more or obtain tailored data, analytics and insights for your business, please email us at reports@corelogic.co.nz. 6
Legal Disclaimer Copyright Copyright 2016. CoreLogic NZ Limited (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication, including any data, analytics, statistics and other information contained in this publication (Data). All rights reserved. Data & Research publications Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, currency or completeness of the Data and commentary contained in this publication and to the full extent not prohibited by law excludes all loss or damage arising in connection with the Data and commentary contained in this publication. You acknowledge and agree that CoreLogic does not provide any investment, legal, financial or taxation advice as to the suitability of any property and this publication should not be relied upon in lieu of appropriate professional advice. Published date: 30 January 2017 Contact Call us 0800 355 355 Email reports@corelogic.co.nz Wellington office Level 2 275 Cuba Street PO Box 4072 Wellington 6140 Auckland office Level 21 151 Queen Street Auckland 1010 www.corelogic.co.nz 7
Macro Economic and Demographic Indicators 8
New Zealand Asset Classes The value of Residential property continues to grow beyond one trillion dollars, dwarfing the value of other asset classes. Listed stocks peaked last September, dropped through until the US presidential election in November, then rebounded, but have been flat for the past few weeks. Residential Real Estate $1.01 trillion ($229 billion in home loans) Commercial/Industrial Real Estate $161 billion NZ Listed Stocks $117 billion NZ Super and KiwiSaver $65.7 billion Source: CoreLogic NZ, Reserve Bank of NZ, NZX, NZ Superfund, Financial Markets Authority 9
New Zealand Population Quarterly Change in National Population New Zealand s population continues to grow strongly, fuelled by continuing strong net migration. Auckland s population accounted for nearly half of the national growth over the past year, but all the other main centres also saw population increases, putting pressure on housing supply. Population Change Composition Annual Change in Population Source: Statistics New Zealand 10
Migration Net migration has continued to surge away at record high levels. The projected slowdown in mid-2016 failed to materialise and we are once again seeing record arrivals combined with comparatively low numbers of departures. Likewise we are continuing to see a net gain in people from Australia as Kiwis either return home or are not heading over the ditch for jobs and lifestyle in the numbers they used to. While Auckland is the main beneficiary of this strong net migration, there were also significant gains in Wellington and Christchurch over the past year. Long Term Migration Monthly Net Migration Between New Zealand and Australia Net Gain Last Year % Change TOTAL ALL AREAS 69,954 14.2% Auckland Region 32,768 15.4% Hamilton City 1,581 12.8% Tauranga City 1,188 33.0% Wellington 3,114 69.3% Christchurch City 5,674-1.0% Dunedin City 720 21.6% Main Urban Area (Other) 5,607 144.4% Rural Centres 4,293 114.6% Not applicable/not stated 15,009 101.7% Source: Statistics New Zealand 11
Regional Building Consents The trend for new building consents in Auckland continues to be strongly positive. It is likely that once the December stats come through that they will show building consents in Auckland to be the strongest since 2004. However bear in mind that it takes some time for these consents to translate into new dwellings built. Consent activity is also up across most of the rest of the country, with the exception of Canterbury. New Dwelling Consents Trend Source: Statistics New Zealand In order to build enough houses in Auckland to meet current and future demand, the high level of current activity needs to increase further, then hold for several years. A shortage of skilled workers, increasing costs, time delays, and quality issues are however already starting to emerge in the Auckland market, so there are clearly challenges to be overcome in order to step up the rate of building. 12
Population Growth Compared to Building Consents The increase in building consents for new dwellings has meant that the gap between population growth and housing supply may begin to close. The time lag between a consent being issued and the dwelling being finished means that it still may be many months or even years before this translates into a physical closing of the gap. Quarterly Population Change and Building Consents Nationwide Source: Statistics New Zealand, MBIE The above calculation assumes 80% of dwellings consented are completed and will house the current average number of people (2.7 people per house). For example, over the year to July 2016 there were 31,185 dwellings consented (able to house 67,360 people), and an increase in population of 97,300, leaving a difference of around 30,000 too many people for dwellings. 13
Buyer Confidence Consumer confidence is still strongly optimistic. This positivity not only reflects views of the current state, but also of future expectations. Confidence has risen outside of Auckland on the back of much stronger dairy prices and strong regional economies. People s expectations of house price increases have eased a little. The gap between New Zealand and Australian consumer confidence continues to widen. This could be part of the explanation for the continued positive net migration between Australia and New Zealand as people see better prospects here than across the Tasman for the time being. ANZ Roy Morgan Consumer Confidence Source: ANZ NZ, Roy Morgan Trans-Tasman Consumer Confidence Index 14 New Zealand Australia Source: Westpac NZ, McDermott Miller
Employment Full and part-time employment both remain up on last year. This along with an increased labour force participation rate and dropping unemployment indicate a healthy employment landscape. While employment remains strong people can continue to get and pay home loans and so contribute to a strong housing market. A significant weakening of the labour market would flow through to housing, but there is no sign of that yet. Annual Change in Employment, Full-time and Part-time Labour Force Participation Rate Unemployment Rate Source: Statistics New Zealand 15
Interest Rates and Mortgage Debt Retail mortgage interest rates are now past their historic lows and beginning to creep upwards as the cost of offshore funding increases. The Official Cash Rate (OCR) set by the Reserve Bank is unlikely to change in the medium term, so it will be this offshore funding alone pushing up rates. As a result mortgage interest rates look set to remain low for some time yet. These low interest rates continue to make the record high level total household debt manageable, a situation only likely to change when interest rates rise significantly. That would appear to be some years off yet under current expected global financial conditions. Projected Official Cash Rate Mortgage Interest Rates Debt Level and Serviceability Source: Reserve Bank of New Zealand 16
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Housing Overview 18
Values Average Value of Housing Stock - New Zealand Nationwide values are still increasing according to the latest monthly QV house price index. The rate of quarterly growth has slowed to only 1.3% but the annual rate of increase holds steady at 12%. The previous round of LVR restrictions in October 2015 saw a similar slowdown in value increases, but they were very short-lived. That remains our expectation with the latest restrictions that came into force late last year, and while values may drop a little further in coming months they will likely begin to increase again by mid-year. Annual and Quarterly Change in Value 19
Sales Volumes Sales volumes dropped throughout most of 2016, and by mid-year had begun to drop below the same month a year earlier. This downward trend in sales volumes was already well in play by the time the latest restrictions kicked in. The previously hot markets of Hamilton and Tauranga saw the biggest annual drop in sales activity, while Auckland and Wellington had a more modest drop. Christchurch and Dunedin were more or less steady year on year. Nationwide Sales Volumes Nationwide Annual Change in Sales Volumes Regional Sales Volumes Year-on-Year 20
Rent While the pace of value increase has slowed, the rate of rent increases has gradually been picking up. This could be landlords seeking to offset the increased cost of lending from the latest round of restrictions imposed by the Reserve Bank. As a result of the increasing rents, nationwide gross yield has been flat for the past few months, a change from the decline in yields which began in 2011. All the main centres have lower yields than this time last year as value increases have still outstripped rent increases. National Annual Change in Value and Rent Gross Rental Yield - National Gross Rental Yield - Main Centres Source: MBIE, CoreLogic NZ 21
Market Activity There has been a significant decline in market activity in Auckland since November. The first few weeks of the New Year have been well below the same time last year. This suggests that the latest round of lending restrictions are particularly impacting Auckland buyers. The rest of the country has rebounded to pre-christmas levels, but this does vary in places. Market Activity Relative to pre-christmas 2015 Latest 3 Weeks Year-on-Year Auckland 82% Hamilton City 88% Tauranga City 88% Wellington Region 106% Christchurch City 88% Dunedin City 124% This market activity is based on the number of automated valuations run by bank staff using our systems each week. This number of valuations correlates very closely to the number of sales that will subsequently occur so this is an extremely timely measure of buyer demand, more than any measure of sales. We can also track across any geographic area. 22
Valuations Completed Market Activity This map shows activity in the latest three weeks compared to the same three weeks last year. Compared to a year ago activity is down in Auckland, steady in the middle of the North Island, and up year on year in the lower part. In the South Island activity is steady in many areas, but up in Marlborough, Nelson, and much of Otago and Southland. * Size of bubble represents the level of activity for the period 2 January 2017-22 January 2017 23
Listings New Listings New listings have begun to pick up again after the Christmas break. It is still too early to get a decent read on how the year has started, but in both Auckland and the rest of the country the number of new listings appears to be at expected levels. New Listings Average last 3 weeks 1 month change 1 year change New Zealand 1,370-18% -5% Auckland 400-16% -4% Waikato 147-14% 12% Bay of Plenty 108-29% -8% Wellington 144 25% -6% Canterbury 202-22% -12% Otago 50-35% -23% 24
The total number of listings typically drops away at this time of year as the sales activity that carries on over December and January outstrips the number of new listings coming to market. From about late January onwards the total number of listings begins to pick up again with the seasonal surge in new listings. The total number of listings in Auckland is similar to last year. But that is no good thing as total listings have been low for several years in Auckland, making it tough for buyers. Across the rest of the country total listings continue to drop because there have been more sales than new listings. Total Listings Total Listings Latest week 1 month change 1 year change New Zealand 25,848-9% -16% Auckland 6,680-15% 11% Waikato 2,614-6% -20% Bay of Plenty 1,835-5% -3% Wellington 1,476-12% -31% Canterbury 4,297-7% -11% Otago 1,025-8% -41% 25
Buyer Classification The data for Q4 is now complete and we are beginning to see the first signs of a weakening in investor activity in response to the latest lending restrictions. Mover activity continues to be under par, while first home buyers are now back at the same level they were before the first round of LVR restrictions came in to force in late 2013. Buyer Classification - New Zealand 26
House Price Index Values in Auckland dropped in December, as they did briefly in response to previous lending restrictions. Hamilton has also levelled off, and the latest data we have suggests that Tauranga is doing likewise. That is a big change from the rapid growth both of those cities experienced last year. The rate of growth has also slowed in Wellington, but in Dunedin the steady increases in value seem to be continuing. Average Dwelling Value December 2016 Current Value 3 months 12 months Since Peak New Zealand $627,905 1.3% 12% 52% Auckland $1,047,179 1.5% 12% 92% Hamilton $534,860 1.1% 20% 48% Tauranga $672,197 4.3% 24% 40% Wellington $574,410 3.9% 21% 26% Christchurch $494,247-0.3% 3% 30% Dunedin $354,133 4.4% 15% 24% Source: CoreLogic NZ QV Monthly House price index 27
House Price Index Annual Value Change Over the past year values have been increasing in almost every town and city, the notable exception being Canterbury. There was particularly strong growth in the areas surrounding Auckland, the lower North Island, and in Queenstown Lakes District. 28 *Size of bubble represents the number of properties in the Territorial Authority
The three month change in values begins to show a patchier picture. Parts of Auckland are no longer increasing, along with Hamilton and parts of the central North Island. For the time being there is continuing strength in most other areas but we expect that to moderate over the next couple of months. Three Month Value Change *Size of bubble represents the number of properties in the Territorial Authority 29
Main Cities Housing Market Indicators 30
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The house price index for December dropped from November, and as a result the change in values over the past three and twelve months has slowed considerably across Auckland. The previous round of LVR restrictions in October 2015 targeted at Auckland caused a short term drop in values and we expect that over the coming months values will continue to drop. Beyond that the upward forces of low interest rates, high migration and a housing shortage are likely to once again see values in Auckland begin to rise from mid-year, although at a more modest pace than we have seen in recent years. Auckland Values Average Value of Housing Stock - Auckland Annual and Quarterly Value Change - Auckland December 2016 Current Value 3 months 12 months Since Peak Rodney $929,162 3.8% 14% 58% North Shore $1,218,254 0.9% 12% 89% Waitakere $840,639 2.0% 12% 98% Auckland City $1,218,979 2.0% 11% 96% Manukau $904,516 1.0% 14% 98% Papakura $681,953 2.1% 13% 90% Franklin $659,906 4.9% 14% 67% 32
As a result of increasing values there are now no suburbs in Auckland where the average value is less than $500k. These may briefly return if values continue to drop in Auckland. 104 Auckland suburbs have an average value of over $1m. Current Auckland Suburb Values Median Value of Housing Stock 20 km 10 km *Based on CoreLogic Median E-valuer 33
Auckland Suburb Value Change While all Auckland suburbs are showing an increase in value over the past year, the fastest percentage growth has been across Manukau and in the CBD apartment market. Three Month Value Change *Size of bubble represents the number of properties in the suburb. Based on CoreLogic Median E-valuer 34
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Buyer Classification - Auckland Auckland investor activity has begun to tail off in response to the latest lending restrictions. First home buyers picked up in Q4 after gradually sliding during 2016 and are now nearly back at the same level they were before the first round of LVR restrictions were imposed in 2013. 36
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There has been a significant turnaround in value increases in Hamilton. From increasing at 30% year on year during 2016, the house price index for December shows values dropping slightly. The slowdown is particularly evident in the Central and North West of Hamilton where quarterly growth has now dropped to under 1%. Hamilton Values Average Value of Housing Stock - Hamilton Annual and Quarterly Change in Value - Hamilton Hamilton Central & North West December 2016 Current Value 3 months 12 months Since Peak $499,701 0.9% 20% 40% Hamilton North East $681,272 0.6% 21% 52% Hamilton South East $484,566 1.4% 19% 39% Hamilton South West $467,435 1.2% 19% 37% 38
Buyer Classification - Hamilton There has been a change in mix of the type of investors active in the Hamilton market. The latest quarter has seen a significant drop in activity from Auckland based investors. That slack has been picked up by local investors who were missing out during the time the Aucklanders were most active. First home buyers and movers don t appear to have been impacted by the latest lending restrictions. 39
The latest house price index appears to show values in Tauranga continuing to rise at the same pace. However other measures of value we have suggest that values have begun to flatten so we would expect the house price index to reflect that in coming months. Tauranga Values Average Value of Housing Stock - Tauranga Annual and Quarterly Change in Value - Tauranga 40
The most significant change in the mix of buyers in Tauranga has been the continued increase of activity by Auckland investors. They now make up 10% of the activity there. Buyer Classification - Tauranga 41
The rapid increase in Wellington values during 2016 has eased off in recent months, with the quarterly increase slowing to less than 4%. Porirua and Upper Hutt both increased by more than 5% over the three months, while Lower Hutt was just under 4%. Wellington Values Average Value of Housing Stock - Wellington Annual and Quarterly Change in Value - Wellington December 2016 Current Value 3 months 12 months Since Peak Porirua $477,692 5.4% 20% 25% Upper Hutt $422,596 5.2% 22% 20% Lower Hutt $470,907 3.9% 21% 20% Wellington City $693,842 4.8% 22% 30% 42
There was a distinct drop in investor activity in Q4 after a flurry of activity in Q3, potentially in advance of new lending restrictions on investors. Meanwhile first home buyer activity has surged to record high levels at 30% of all sales. Movers are still less active than usual, with those lending restrictions making it harder for people to upgrade. Buyer Classification - Wellington 43
Values have been increasing at only 2% to 3% per year during much of 2015 and 2016, but sped up to nearer 5% in late 2016. In December the house price index dropped slightly in what may be a response to the latest lending restrictions. The Christchurch Hills area dropped significantly in the previous three months, while the southwest area picked up a little. Christchurch Values Average Value of Housing Stock - Christchurch Annual and Quarterly Change in Value - Christchurch December 2016 Current Value 3 months 12 months Since Peak Banks Peninsula $513,275-0.1% 5% 7% Christchurch Hills $656,669-3.5% 0% 19% Christchurch Central & North $585,705 0.2% 3% 32% Christchurch East $368,548-1.6% 1% 19% Christchurch Southwest $474,260 1.3% 4% 40% 44
Buyer Classification - Christchurch There was some volatility in the share of buyers throughout 2016 but the year ended with investors bouncing up to 39%, mostly at the expense of movers. First home buyers did dip slightly at the end of the year but their share of sales is still back at 2013 levels having recovered from the drop caused by the introduction of the first round of LVR restrictions. 45
Unlike the other main centres there is no sign of a slowdown in value increases in Dunedin. In contrast the latest house price index has ticked upwards. As a result the quarterly and annual increase in values has also risen. Taieri and Dunedin South appear to be leading the charge. Dunedin Values Average Value of Housing Stock - Dunedin Annual and Quarterly Change in Value - Dunedin December 2016 Current Value 3 months 12 months Since Peak Dunedin Central & North $368,259 3.4% 13% 22% Dunedin South $338,291 4.4% 16% 18% Peninsula & Coastal $308,938 1.4% 11% 14% Taieri $371,192 6.6% 16% 26% 46
Buyer Classification - Dunedin While investor activity bounced back up at the end of the year, there was a much more significant increase in the share of sales to first home buyers. First home buyers are now the most active they have been since at least 2005, apparently not put off through lack of confidence or lending restrictions that might be hurting other buyer groups. First home buyers have maintained their share, while movers have dropped dramatically. Auckland multiple property owners remain an increased, but relatively small presence in the market. 47
CoreLogic, 2016. Except as provided by the Copyright Act 1994, no part of this publication may be reproduced or stored in a retrieval system in any form or by any means without the prior written permission of the copyright owner. CoreLogic and the CoreLogic logo are trade marks of CoreLogic Solutions LLC and are registered trade marks in various countries including New Zealand and Australia. All solution names in this publication are trade marks or registered trade marks of CoreLogic Solutions LLC or are used with the permission of their respective owners.