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PMI RESIDENTIAL PROPERTY MID-YEAR UPDATE FORECASTS COOLING
OF NEW ZEALAND RESIDENTIAL PROPERTY MARKET
After five years of record economic expansion, New Zealand’s economy is slowing down, according to findings released today in The PMI Residential Property
Overview Mid-Year Update.
While price growth has continued in most regions, supported by good job security and income prospects as well as low interest rates, real estate sales activity has fallen 14% from its peak in April 2004. Residential property prices in New Zealand may fall across many regions in 2006, but continued economic growth of 2.5-3% will prevent a sharper correction of house prices, the study predicts.
The Mid-Year Update is a study conducted into the NZ residential property market by leading mortgage insurer, PMI Mortgage Insurance (PMI), in conjunction with Infometrics, a key business forecaster.
The Mid-Year Update also predicted that falling interest rates from 2006 may lead to a bounce in house prices over 2006/2007, but real property values (i.e. after adjusting for inflation) will still be lower in June 2007 than they are now. Managing Director of PMI Australia and NZ, Ian Graham, said, “Despite the findings in the Mid-Year Update, to date there has been no discernible impact on people’s ability to service their mortgage as NZ continues a period of strong economic growth.”
“New Zealanders historically are diligent with the management of their mortgages and we would expect this to continue throughout this period,” he added.
The PMI Residential Property Overview Mid-Year Update provides forecasts for the 2005-2007 period for the following regions:
• AUCKLAND: A lack of rental growth in this market is a clear indication
of the effect that weaker net migration and slower population growth
are having on the demand for housing in the region. Average rents
rose just 0.1% over the year to March, with falls occurring in North
Shore, Waitakere, and Auckland cities. Growth in the median house
price has been recently strengthened due to an increased
proportion of higher valued properties being sold. First home buyers
are struggling with affordability, and investor demand is drying up
given low yields and the increased difficulty in finding tenants. House
prices are likely to be stagnant in the region until mid-2006, when
lower interest rates will begin to improve affordability.
• WELLINGTON: sales volumes in this market have softened in line with
the rest of the country over the last year but house price growth,
rental growth, and new building activity have all slowed more
markedly. The result is that property in the region is unlikely to be
overvalued as in some other parts of New Zealand. The median
house price is predicted to hold around $290,000 over the next 12
months, with a small rise over the following year as interest rates drift
downwards.
• WAIKATO/BAY OF PLENTY/GISBORNE: Price growth has accelerated
over the last six months in this region with average prices rising 27%
over the last year. Sales volumes have started to decline (down 9%
over the year ending March) and this is likely to begin affecting prices
in coming months. With gross rental yields sliding from 5.7% to 4.7%
over the last year, demand from investors is likely to wane as well,
and average house prices in the region are expected to hold in the
$240,000-$250,000 band over the next two years.
• CHRISTCHURCH: Recent trends in this market have generally mirrored
nationwide movements, but unlike most of the rest of the country,
house price growth in Christchurch failed to rally over the first quarter
of 2005. House price growth has slowed from a peak of 31%p.a in
mid-2004 to 17%p.a by March this year. The city’s population growth
has weakened, and with building activity having eased only 5% from
its peak last year, an oversupply of housing is developing in the
region. The median house price is expected to stabilise at around
$250,000 over the next two years.
• NORTHLAND: this region has so far largely withstood the negative
pressures from higher interest rates and slower population growth. The
annual sales total has fallen 7.2% over the last year, and growth in the
rate of new house building is the strongest in the country at 10%p.a.
One factor behind the Northland market’s resilience may be the
slower rate of house price growth experienced in the region over the
last three years (11%p.a. compared to 14% nationally). Although the
affordability of housing has been reduced, the shift has been less
pronounced than the nationwide average. This is a positive indicator
for property values in the Northland region, which are likely to avoid
declines as the housing market continues to slow over 2005/2006.
• TARANAKI/MANAWATU/WANGANUI: the property cycle in this market
has lagged behind much of the rest of the country, and house price
growth is still strong at 27%p.a. Sales volumes have been gradually
easing over the last year, but have only fallen 8.7% during that time
(compared to a 13% fall nationally). The sustained lift in property
values has supported an ongoing rise in building activity, which was
still climbing by March this year. However a sharp drop in gross rental
yields, from 8.2% to 5.8% over the last two years, suggests that there
will be little or no price growth over the next two years.
• CANTERBURY/WESTLAND: rapid growth averaging 24%p.a over each
of the last two years has started to impact turnover in the housing
market in Provincial Canterbury and Westland, with sales volumes
over the year to March down 18% over the previous 12 months.
Residential building activity has been strong in response to the
increased demand for housing and rose 17% over the year to March
2005. The expanding supply of housing in the region is likely to
undermine further price growth from the middle of this year.
• OTAGO/SOUTHLAND: property values in this region have continued to
climb over the last 6 months, despite a drop in sales activity and a
sluggish rental market in Southland. Housing in Oamaru is among the
most overvalued in the country, but property prices in Central Otago
and Queenstown have leveled following Inland Revenue’s
investigation into property speculators in the area. Price falls are
predicted in the region over the next 12-18 months, particularly in
coastal Otago (outside Dunedin) and Southland, where population
growth is likely to be weakest.
• HAWKE’S BAY: this region recorded the strongest house price growth
in the country over the year to March, with the median house price
up 28% over the last 12 months. Even with a 7.7% increase in average
rents over the same period, the rapid increase in capital values has
placed downward pressure on rental yields, and implies that housing
in the region is overvalued. Average price falls of around 4% over the
year to June 2006 are possible before property values stabilise again
over the following year.
• NELSON/MARLBOROUGH: as predicted 18 months ago, house prices
in this region were among the first in the country to weaken. Sales
volumes fell 25% over the 2004 calendar year and house price growth
shrank from 53% to 2.7% by the end of the year. More recent data
shows modest improvements in sales volumes, but this is most likely to
reflect increased pressure on some vendors to sell, rather than a
genuine improvement in the property market in the region. With
housing in this region the least affordable in the country after
Auckland, price falls appear inevitable over the coming year.
Released for PMI by Kardan Consulting
For further information please contact:
Karen Bristow – Kardan Consulting
+61 2 9967 3245
(A more detailed PDF copy of the PMI Residential Property Overview
News source:
Regards
PMI RESIDENTIAL PROPERTY MID-YEAR UPDATE FORECASTS COOLING
OF NEW ZEALAND RESIDENTIAL PROPERTY MARKET
After five years of record economic expansion, New Zealand’s economy is slowing down, according to findings released today in The PMI Residential Property
Overview Mid-Year Update.
While price growth has continued in most regions, supported by good job security and income prospects as well as low interest rates, real estate sales activity has fallen 14% from its peak in April 2004. Residential property prices in New Zealand may fall across many regions in 2006, but continued economic growth of 2.5-3% will prevent a sharper correction of house prices, the study predicts.
The Mid-Year Update is a study conducted into the NZ residential property market by leading mortgage insurer, PMI Mortgage Insurance (PMI), in conjunction with Infometrics, a key business forecaster.
The Mid-Year Update also predicted that falling interest rates from 2006 may lead to a bounce in house prices over 2006/2007, but real property values (i.e. after adjusting for inflation) will still be lower in June 2007 than they are now. Managing Director of PMI Australia and NZ, Ian Graham, said, “Despite the findings in the Mid-Year Update, to date there has been no discernible impact on people’s ability to service their mortgage as NZ continues a period of strong economic growth.”
“New Zealanders historically are diligent with the management of their mortgages and we would expect this to continue throughout this period,” he added.
The PMI Residential Property Overview Mid-Year Update provides forecasts for the 2005-2007 period for the following regions:
• AUCKLAND: A lack of rental growth in this market is a clear indication
of the effect that weaker net migration and slower population growth
are having on the demand for housing in the region. Average rents
rose just 0.1% over the year to March, with falls occurring in North
Shore, Waitakere, and Auckland cities. Growth in the median house
price has been recently strengthened due to an increased
proportion of higher valued properties being sold. First home buyers
are struggling with affordability, and investor demand is drying up
given low yields and the increased difficulty in finding tenants. House
prices are likely to be stagnant in the region until mid-2006, when
lower interest rates will begin to improve affordability.
• WELLINGTON: sales volumes in this market have softened in line with
the rest of the country over the last year but house price growth,
rental growth, and new building activity have all slowed more
markedly. The result is that property in the region is unlikely to be
overvalued as in some other parts of New Zealand. The median
house price is predicted to hold around $290,000 over the next 12
months, with a small rise over the following year as interest rates drift
downwards.
• WAIKATO/BAY OF PLENTY/GISBORNE: Price growth has accelerated
over the last six months in this region with average prices rising 27%
over the last year. Sales volumes have started to decline (down 9%
over the year ending March) and this is likely to begin affecting prices
in coming months. With gross rental yields sliding from 5.7% to 4.7%
over the last year, demand from investors is likely to wane as well,
and average house prices in the region are expected to hold in the
$240,000-$250,000 band over the next two years.
• CHRISTCHURCH: Recent trends in this market have generally mirrored
nationwide movements, but unlike most of the rest of the country,
house price growth in Christchurch failed to rally over the first quarter
of 2005. House price growth has slowed from a peak of 31%p.a in
mid-2004 to 17%p.a by March this year. The city’s population growth
has weakened, and with building activity having eased only 5% from
its peak last year, an oversupply of housing is developing in the
region. The median house price is expected to stabilise at around
$250,000 over the next two years.
• NORTHLAND: this region has so far largely withstood the negative
pressures from higher interest rates and slower population growth. The
annual sales total has fallen 7.2% over the last year, and growth in the
rate of new house building is the strongest in the country at 10%p.a.
One factor behind the Northland market’s resilience may be the
slower rate of house price growth experienced in the region over the
last three years (11%p.a. compared to 14% nationally). Although the
affordability of housing has been reduced, the shift has been less
pronounced than the nationwide average. This is a positive indicator
for property values in the Northland region, which are likely to avoid
declines as the housing market continues to slow over 2005/2006.
• TARANAKI/MANAWATU/WANGANUI: the property cycle in this market
has lagged behind much of the rest of the country, and house price
growth is still strong at 27%p.a. Sales volumes have been gradually
easing over the last year, but have only fallen 8.7% during that time
(compared to a 13% fall nationally). The sustained lift in property
values has supported an ongoing rise in building activity, which was
still climbing by March this year. However a sharp drop in gross rental
yields, from 8.2% to 5.8% over the last two years, suggests that there
will be little or no price growth over the next two years.
• CANTERBURY/WESTLAND: rapid growth averaging 24%p.a over each
of the last two years has started to impact turnover in the housing
market in Provincial Canterbury and Westland, with sales volumes
over the year to March down 18% over the previous 12 months.
Residential building activity has been strong in response to the
increased demand for housing and rose 17% over the year to March
2005. The expanding supply of housing in the region is likely to
undermine further price growth from the middle of this year.
• OTAGO/SOUTHLAND: property values in this region have continued to
climb over the last 6 months, despite a drop in sales activity and a
sluggish rental market in Southland. Housing in Oamaru is among the
most overvalued in the country, but property prices in Central Otago
and Queenstown have leveled following Inland Revenue’s
investigation into property speculators in the area. Price falls are
predicted in the region over the next 12-18 months, particularly in
coastal Otago (outside Dunedin) and Southland, where population
growth is likely to be weakest.
• HAWKE’S BAY: this region recorded the strongest house price growth
in the country over the year to March, with the median house price
up 28% over the last 12 months. Even with a 7.7% increase in average
rents over the same period, the rapid increase in capital values has
placed downward pressure on rental yields, and implies that housing
in the region is overvalued. Average price falls of around 4% over the
year to June 2006 are possible before property values stabilise again
over the following year.
• NELSON/MARLBOROUGH: as predicted 18 months ago, house prices
in this region were among the first in the country to weaken. Sales
volumes fell 25% over the 2004 calendar year and house price growth
shrank from 53% to 2.7% by the end of the year. More recent data
shows modest improvements in sales volumes, but this is most likely to
reflect increased pressure on some vendors to sell, rather than a
genuine improvement in the property market in the region. With
housing in this region the least affordable in the country after
Auckland, price falls appear inevitable over the coming year.
Released for PMI by Kardan Consulting
For further information please contact:
Karen Bristow – Kardan Consulting
+61 2 9967 3245
(A more detailed PDF copy of the PMI Residential Property Overview
News source:
Regards
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