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House values rise at the slowest annual pace in six months in March, QV says

New Zealand property values increased at the slowest annual pace in six months in March as lower Christchurch valuations, high-debt lending restrictions and interest rate hikes weighed on the market.

House values rose at an 8.8 percent annual pace in March, the slowest annual gain since September when values rose 8.4 percent, according to state agency Quotable Value. Residential values rose 0.1 percent in the past three months, down from a 1.8 percent pace in the three months through February, as they were dented by a 1.5 percent decline in Christchurch values.

The Reserve Bank imposed loan-to-value mortgage lending restrictions in October to cool the market on concern rapidly accelerating house prices in Auckland and Christchurch could lead to an asset price bubble and cause financial instability. Governor Graeme Wheeler starting hiking interest rates last month to head off inflation and is expected to raise the rate further this month.

"The LVR speed limits and the Reserve Bank signalling further interest rate hikes is likely to be contributing to a levelling off in the growth of property values in Auckland and for the first time in more than two years we are seeing a decrease in some areas of that market," said QV spokeswoman Andrea Rush.

Values in Auckland increased at a 14.3 annual pace in March, and are up 0.9 percent over the past three months. Values fell in some areas such as Auckland South which declined 0.5 percent in the past three months, QV said.

In Wellington, house values rose at a 2.8 percent annual pace, while Christchurch values increased at an 8.3 percent annual pace.

Nationwide, values are 12.6 percent above the previous market peak of late 2007, QV said.


Comments and questions

House price inflation is occurring in most major cities in the world.
This leads me to believe that the problem is not just supply and demand for housing. If that were the case, then only NZ would have the problem.
The main reason for this housing inflation is Governments flooding the world with cheap money to remedy the Global Financial Crisis. All this money was intended to go into business etc. to create jobs and kick start the economies. Instead it has gone into unproductive areas like existing houses.

There WILL be a MAJOR housing correction coming. Sadly, no-one knows when, but people will be hurt.

I agree with that and like your point that many countries are undergoing house price inflation. It's interesting that interest rates are extremely low in all of them - wonder what will happen when rates recover to more normal levels?

it is more dangerous for nz as Auckland is such a large component of the total economy. Moscow, London, New York, Sydney, Vancouver. It would hurt to have a severe correction in such places but they do not reflect such a large portion of the economy or population as Auckland does.

I agree. People are naturally putting more of their savings into housing and property because holding it in fiat currencies is disincentivised by inflation and low interest rates (negative real rates). The net effect is the monetisation of houses and property as they serve the "store of value" property that government monies are no longer performing, aka asset inflation.

It should also be noted that critics of people "not saving" are specifically referring to savings held in government currencies or debt notes denominated in fiat. There are many other ways to hold savings, not the least commodities, collectibles, stocks, property and housing.

Agree completely - however the problem with using a house as a store of value is that it provides only one function "housing" and by tying you to the location that is going to be in doldrums (AKL as 37% of the NZ economy - wouldn't want to be rushing for the exits in that disaster!) has no risk diversification from multiple perspectives.

The best thing you can invest in as a store of value is yourself - as hackneyed as that sounds!

totally agree. Cheap money seeks a home.