House prices stabilising and listings shortage may push prices up, QV says (Update 1)

Quoteable Value's (QV) measure of national house prices showed an 8.1% fall in prices in the three months to May from the same period a year earlier, reflecting an improvement from the 9.2% annual fall in the previous three months to April. (Updates with movement of House Price Index from peak) House prices have fallen 11.16% from their peak in January 2008, QV's indices show. The QV house price index was 0.5% up in May from April, when the index was down 11.21% from the peak. "The recent stabilisation in values indicates that the wider market is moving toward some form of equilibrium," QV Valuations spokesperson Glenda Whitehead said. "In many areas there continues to be strong interest in property, with more potential purchasers attending open homes, and more competitive offers being presented,"she said. "Vendors have typically adjusted their price expectations to meet the current market, and buyers are presenting reasonable offers, knowing they have some competition.  There is an obvious lack of new listings coming onto the market in some areas, this creates higher demand and therefore helps hold and even push values up slightly." Here is the rest of the QV statement in full.

"The recent buoyant activity in the residential market has been fuelled by people taking advantage of lower mortgage interest rates. Established investors are now back in the market along with first home buyers and those looking to upgrade" said Whitehead. The national average sale price declined slightly to $371,555 in May from $372,981 in April, and is now 4.1% lower than the same time a year ago. Changes in sales prices are influenced by the composition of the sales occurring, and this composition has changed markedly over the last twelve months. Over much of the last year, there has been a lack of activity at the lower end of the market, which has artificially held average prices higher. In recent months the market composition has changed again, with the lower end once again becoming more active. The QV Index methodology corrects for these composition changes and provides an accurate measure of changes in the property values. "It is difficult to predict where property prices will go from here. The market is driven by a multitude of factors, but in the past interest rates, net migration and employment have been strong drivers. The rapid sustained growth of the housing market over the last few years, followed by the current unusual economic conditions, have shown many of the traditional factors are not reflecting directly in the current property market in the same way they have in the past" said Whitehead. "Longer-term mortgage rates having risen sharply over the last few weeks and are likely to stay higher, unemployment is forecast to rise over the next two years, and dairy payouts are set to decline.  All of these things would normally put further downward pressure on the market" said Whitehead. "Forecast net migration is more positive, but the coming winter months are traditionally a slow period for the property market and will provide a true test for whether the recent property market revival will continue" said Whitehead. Property values in all the main centres increased slightly in recent months. As a result the annual change in property values across the Auckland area has improved further from -9.0 per cent last month to -7.6 per cent.  The Wellington area has also improved to -7.4 per cent, Hamilton to -7.5 per cent, Tauranga to -9.4 per cent, Christchurch to -8.1 per cent and Dunedin improved markedly from -8.0 per cent reported last month to -5.4 per cent. Almost all the provincial centres also showed slight recent increases in property values. This has led to the year on year change improving to -12.8 per cent in Whangarei, -9.5 per cent in Rotorua, -14 per cent in Gisborne, -8.9 per cent in Palmerston North, -8.4 per cent in Queenstown Lakes and -10.3 per cent in Invercargill.  New Plymouth remained steady at -5.4 per cent while Wanganui declined further to -4.5 per cent. Auckland Property values in the Auckland region declined by 7.6% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 9% annual decline reported in April. The average sale price for the region decreased from $486,986 to $483,397. Glenda Whitehead of QV Valuations said: "The buoyant mood that started post- Christmas continues, with more groups through open homes, more competitive bids at auction, and the number of days to sell down in general. The net result is the small recovery in values we see in our numbers this month. Agents are anecdotally confirming this and are also reporting that there is a shortage of listings in many areas. Overall there is stronger demand for property from both home-buyers and investors, particularly in the West, including Te Atatu, West Harbour and Titirangi.  It would be fair to say that the majority of activity within wider Auckland is in what we describe as the "˜affordable' price bracket, typically under $500,000". "Investors are now focussed on getting good cash flow returns, and are no longer buying based on potential capital gains. "˜Home and income' style properties are still very popular, probably due to the extra income taking some pressure off mortgage repayments.  Developers are still absent from the market, with demand pressures and pricing not yet attracting them back.  They also now face added demands from banks when they apply for funding" Glenda said. "While the mood is more positive, winter is now upon us and the wider economic issues have not abated.  If buyer demand is maintained over the winter period, and the low listings levels typical of this time of year don't increase, we could potentially see a continued stabilisation of values through into spring. There is still widespread concern around job security, and while lower interest rates are making it easier for some, others remain locked into higher rates. We have also noted that a number of our clients in recent weeks are Kiwi's returning from abroad, some from the UK and Western Australia" Glenda said. Hamilton Property values in Hamilton declined by 7.5% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 8.8% annual decline reported in April. The average sale price for the city increased from $335,091 to $346,274. Mr. Richard Allen of QV Valuations said; "For the third consecutive month the rate of annual decline in the Hamilton region's housing market has eased. All four areas in the city experienced this; the Central City/North West Hamilton area from -11.5% in April to -8.7 % in May, the South East from -8.0 % to -7.2 %, the South West from    -8.7 to -7.4% and the North East from -7.4% to -6.5%". "This recovery in the rate of annual decline indicates that house prices have flattened out for the time being. Also, we are now comparing back to a year ago, where prices were declining steeply. However, with a reduced dairy payout forecast for the 09/10 season, and the economic recession, I am of the opinion that this may only be an aberration. A potential lack of demand as we enter the winter months could put further downward pressure on residential property prices in Hamilton and the Waikato" Mr. Allen said. Tauranga Property values in Tauranga declined by 9.4% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 9.9% annual decline reported in April. The average sale price decreased from $432,461 to $425,621. Mr. Shayne Donovan-Grammer of QV Valuations said; "While the level of activity is more buoyant than it was a few months ago, talk of a prolonged stabilisation of our property market is probably premature. Improvements in the retail, agricultural, business and employment sectors need to take place before a sustainable recovery in the property market can occur". "Most of the sales I am seeing are at prices which present good value and overall I think values are still slowly falling. The bulk of the activity in the Tauranga region is under the $450,000 bracket with the most action occurring in the $250,000 to $350,000 price range" Mr. Donovan-Grammer said. Wellington Property values in the Wellington region declined by 7.4% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 8.5% annual decline reported in April. The average sale price for the region remained relatively steady at $424,411. Mr. Kerry Buckeridge of QV Valuations said; "From these latest figures it is obvious that the encouraging signs we have seen in the market place over the last couple of months have had a positive affect on values in and around Wellington. Increased buyer interest and enquiry was followed by increased sales volumes, which has now translated into healthier prices. It is of course impossible to tell at this stage whether this is an actual house market recovery in Wellington, or if we will see further falls through winter." "Of particular interest at the moment is the shortage of listings throughout the Wellington region, which is obviously lending a hand to sale prices. The shortage can anecdotally be attributed to a few factors. Firstly, the pricing gap between the unrealistic sellers of last year and the cheeky buyers of late has all but closed. Pricing expectations are now clearer for buyers and sellers, ultimately resulting in listings being sold. Secondly, there is uncertainty in the market place, so vendors who don't have to sell won't. Lower interest rates are obviously having an affect too, as housing affordability has improved and is bringing first home buyers into the market. It is also worth noting that housing supply traditionally dwindles coming into winter" Mr. Buckeridge said. "More established investors are certainly making a comeback, as the prospect of positive returns is back on the cards. It seems that savvy investors with portfolios are leading the pack, as they are more likely to meet bank lending requirements. For this group of buyers the numbers really have to stack-up. Capital gains aren't too high on the agenda, so rental returns need to make any potential outlay feasible" Mr. Buckeridge said. Christchurch Property values in Christchurch declined by 8.1% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 9.6% annual decline reported in April. The average sale price for the city decreased slightly from $342,929 to $339,695. Melanie Swallow of QV Valuations said; "These annual numbers need to be treated with caution, as the same period last year was a time of decline, measured against the month ending May 2009 which shows a period of flattening. So by default the numbers will show a recovery.  It is a positive sign as far as market sentiment goes, but it is still too early to tell whether this 3-month stabilisation is the start of an extended levelling-off period. The small decrease in the average sale price is easily skewed by the mix of property being sold, so although this has limited value, it does reinforce a flattening in the market." "Suburban Christchurch has held well, with the central, northern, eastern and hill suburbs all showing an ease in the rate of annual decline. The central and northern suburbs are showing the largest recovery of 2.7 per cent" Mrs. Swallow said. "Anecdotal evidence from different market segments suggests the level of activity to be strong under $350,000, which typically represents the entry-level and investor part of the market. This is followed closely by the $350,000 to $600,000 market segment, which generally represents the next step up the property ladder for most people. The market segment of properties priced over $600,000 appears to have the least amount of activity. Again, this needs to be kept in context as it represents a much smaller part of the market overall. Properties over $1,000,000 are very slow to sell in Canterbury at present" Mrs. Swallow said. "It seems as though job security is still the key driver behind purchase decisions at present. This lack of security, coupled with the normal seasonal variation, means we expect to see a continuing pattern of consolidation over the winter period" Mrs. Swallow said. Dunedin Dunedin's residential property values decreased by 5.4% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), a substantial improvement on the 8% annual decline reported in April. The average sale price in Dunedin increased from to $257,160 to $264,180. Mr. David Paterson of QV Valuations said; "It is good to see an improvement in the QV statistics, which confirms some of the anecdotal evidence of an improvement we have heard over the last couple of months. Values in Dunedin declined rapidly from April to July 2008, while the same period in 2009 has been pretty much static. As a result we are now heading for a period where the year-on-year change is moving back towards zero. Last month we reported that the year-on-year values were worst in the Taieri area. The figures this month show a more even change throughout the city". "This improvement in the market which we have witnessed over the last three months is despite some dire predictions from a number of sources. While these statistics are positive, it is too early to say that the market has turned for the foreseeable future. The market is finely balanced and it wouldn't take much to send it into further decline. While affordability has improved markedly over the last year, there is a real concern about job security. This is likely to be the biggest risk to a continued improvement in the property market over the next 12 months" Mr. Paterson said. "Agents are reporting some improvement in the market, although there is a shortage of listings. This may be because of the time of the year, or it could still indicate sellers have unrealistic price expectations and have decided to hold off selling until prices improve. The weather in May was very wet and cold and it will be interesting to see what impact it has had on the May sales figures" Mr. Paterson said.