Expected increase in housing market appears to be absent, QV says

The government valuation agency (QV) indices released today on residential property show a national increase in property values in the three months to January from December. Values in January were 4.4% above the same time last year, but remained 4.3% below the market peak of late 2007. This is compared to 4.9% below the peak in the three months to December. QV said the house prices average sales increase across New Zealand of $409,807 in January, up from the $404,671 in December is a less reliable measure of value change than the QV index because the average is dependable on which part of the market is active at the time. The QV indices show an increase in some sectors of the housing market but overall activity was lower than expected in January, QV Valuations Glenda Whitehead said.

This could be due to the recently announced tax working group recommendations, uncertainty in the market over interest rates, employment  and which direction property prices are likely to move, Whitehead said. "There is increasing debate around the likely impact of the options put forward by the tax working group, but movements in property market are driven by a combination of factors, and while any tax changes implemented will impact, that change will be alongside other market factors such as interest rates, employment security, and bank lending policies prevalent at the time any of those tax changes come into effect," White head said. Frantic market activity of 2009 where multiple buyers were competing for property appears to have eased, with the majority of market activity, especially in the main centres, being driven by existing homeowners and first home buyers rather than investors, she said. The main centres have led the way in improving house values in recent months with values in Auckland Region, Wellington and Christchurch all up:

Values in the Auckland Region are now 7.3 percent up, the Wellington Area is 5.7 percent up, and Christchurch 6.3 percent up. Values in the other main centres have fluctuated in recent months, but still remain above last year by 3.5 percent in Hamilton, 0.6 percent in Tauranga, and 5.0 percent in Dunedin. In the provincial centres values have been more variable over recent months. However, values in nearly all areas are now above the same time last year. Rotorua is 3.3 percent up, Napier 5.1, New Plymouth 7.1, Wanganui 0.1, Palmerston North 5.6, Nelson 3.6, and Invercargill 4.6 percent. Whangarei is the only centre still below last year at -3.9 percent. Queenstown Lakes is 0.5 percent above last year and this is the first time it has shown year on year growth since May 2008. This is due to an increase in values in the last few months after a relatively flat 2009.

Here are the regional reports from QV:

Auckland Property values in the Auckland region increased by 7.3% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), an improvement on the 5.1% annual growth reported in December. The average sale price for the region increased from $535,197 to $549,028. Glenda Whitehead of QV Valuations said; "Auckland's residential property scene in January, like December, was a relatively quiet month, as can be typical of this time of year. Roads around the Auckland region have been free-flowing, perhaps reflecting the absence of its usual population, many of whom may be using up accumulated leave. This laid-back or absent part of the population has probably not sought to make any major life decisions recently and has therefore taken heat out of the property market for the moment. At present values appear to be holding and there is a general feel of stability". "Of those who have been active in the market, homeowners appear more prevalent than investors, with some refinancing while others are preparing to make those buy or sell decisions.  Buyers remain cautious and are taking their time to get a feel for what is going on. With the likelihood of sustained capital growth through this year uncertain, investors continue to focus on cash flows. Adding to their angst are also looming interest rate hikes and potential new taxes, which could simply compound uncertainty" Ms. Whitehead said. "Value increases are patchy and localised to areas where buyers outnumber sellers. In all the region's cities and districts, the market continues to show positive growth when compared to a year ago. When we consider the rise from the lowest period in the market, the cities (North Shore, Waitakere, Auckland and Manukau) have shown the strongest recovery of 6-10%, while the districts (Rodney, Papakura and Franklin) have risen 1-3% from their low points" Ms. Whitehead said. "With schools now back and many returning from extended annual leave, we expect activity over February, March and April to pick up, as these are typically the most active months of the year for Auckland's property market. It remains to be seen what impact this activity will have on values" Ms. Whitehead said. Hamilton Property values in Hamilton increased by 3.5% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), an improvement on the 1.8% annual growth reported in December. The average sale price for the city increased from $343,310 to $350,722. Mairi MacDonald of QV Valuations said; "Residential property values in Hamilton City improved slightly in January 2010 after remaining reasonably steady over the past three months. Value changes were however quite varied across the City. The largest improvement was in Hamilton South East and Hamilton South West areas, with minor increases in the Hamilton North East and Central CBD/ North West areas". "Over the past four months property values in the city have fluctuated within a very narrow range. However, these latest figures indicate that we may be starting to see a gradual increase in values, as has been the trend in the major cities. This is also supported by the average sales price which has increased after remaining relatively constant over the past four months. The market has seemingly absorbed a number of potential setbacks which appeared likely because of poor regional economic factors, but it now appears that we are headed towards a sustained period of stability" Ms MacDonald said. Tauranga Property values in Tauranga increased by 0.6% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), a slight improvement on the 0.1% annual growth reported in December. The average sale price for the region decreased slightly from $424,241 to $422,226. Shayne Donovan-Grammer of QV Valuations said; "Tauranga's residential property market remains fickle and is still tracking behind the other main centres. The last few months have seen most activity in the $200k - $400k price brackets, and this continues but at lower levels overall. This is a traditionally quiet and undecided time of the year, so we may not get a solid grasp of the market's sentiment for another month or two". "There has been a lot of talk lately of land tax and other measures which could adversely affect property owners. There is no clear indication on what will be implemented, which has made some sectors of the market understandably indecisive. Having had two years of a declining market, further uncertainty is not going to do much for value increases" Mr. Donovan-Grammer said. Wellington Property values in the Wellington region increased by 5.7% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), an improvement on the 4.6% annual growth reported in December. The average sale price for the region increased from $448,652 to $460,638. Mr. Pieter Geill of QV Valuations said; "Apart from being quite slow over the holiday season, the residential property market in and around Wellington has been fairly contradictory. Some properties are selling quite fast, while others seem to linger on the market for a long time, usually as a result of overpricing. Buyer attitudes also seem to have hardened somewhat and people are generally making property decisions more cautiously than in October and November last year, despite the shortage of listings over this period". "We have been saying for the last couple of months that we expect more properties to come to market in the near future. Anecdotally, this seems to have started occurring in the Wellington region from late January and continues presently. We are seeing more vendors taking time to seek valuation advice prior to sale, and we are still seeing forced and mortgagee sales trickle through. If a flush of housing does come to market without an equal number of buyers to balance, we may well see values ease. Prices are generally holding well for now though" Mr. Geill said. Christchurch Property values in Christchurch increased by 6.3% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), an improvement on the 4.6% annual growth reported in December. The average sale price for the city increased from $371,034 to $380,268. Melanie Swallow of QV Valuations said; "Property values in Christchurch continued to show a very gentle recovery throughout December and January. Suburban Christchurch has held well with the South West suburbs showing the greatest recovery, up 7.6% on last year, followed by the central and northern suburbs at 6.1%. These results appear to be encouraging, but should still be treated with caution as activity is quite segmented". "In the entry-level market bracket, many properties are still achieving strong sales results and this is where the majority of the activity is occurring. Following close behind is the $400,000 to $500,000 price range.  However, the market is a bit hard to read and is possibly being influenced by seasonal factors such as people using up leave and taking longer holidays than normal. Also, buyers are generally exercising more caution, with first home buyers outweighing investors in the entry level part of the market. Investors are no doubt considering the future increase of long term interest rates" Mrs. Swallow said. "We recommend purchasers continue to exercise caution with their buying decisions.  Uncertainty continues to harass the market place, although overall sentiment is upbeat. We anticipate that our statistics over the next few months will provide a clearer indication of the direction of different market segments" Mrs. Swallow said. Dunedin Property values in Dunedin increased by 5.0% over the past year (calculated over the three months ending January 2010 in comparison to the same period last year), up slightly on the 4.9% annual growth reported in December. The average sale price in Dunedin increased from $276,875 to $279,101. Mr. Tim Gibson of QV Valuations said; "Our January figures for Dunedin are starting to show a slowdown in the growth of residential house values experienced during late 2009. The annual growth in Dunedin city has increased by 0.1% from December to January, the smallest improvement in our year-on-year figures for a while. The QV index is showing the first negative movement since March 2009. January values are still 2.9% below July 2007 levels which was when the residential market peaked in Dunedin". "South Dunedin has shown the most growth, now showing a 9.6% annual increase in values, whilst the peninsular region has slowed substantially. There appears to be a more cautious, wait-and-see approach occurring in the market at present which could be put down to increasing long-term interest rates and uncertainty surrounding taxation changes. Some Real Estate agents have also reported difficulty shifting lower valued properties over January. This price bracket was usually the domain of investors during the latter part of 2009" Mr. Gibson said.