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Property values rise at slowest annual pace in 13 months

New Zealand property values rose at the slowest annual pace in 13 months in July as rising interest rates, restrictions on low-equity home loans and the onset of winter took the heat out of the housing market.

Property values nationwide rose 7.6 percent in July from a year earlier, slowing from an 8 percent annual pace in June, according to state-owned valuer Quotable Value. That was the slowest annual increase since June last year. Sales volumes were between 15 percent and 25 percent lower than the same periods in 2012 and 2013, QV said.

Barfoot & Thompson figures this week showed Auckland house sales fell for a second month in July, adding to a national decline since the Reserve Bank of New Zealand imposed restrictions on mortgages where the buyers had a deposit of less than a fifth of the home's value, in October last year. Governor Graeme Wheeler started hiking interest rates this year, and last month said house price inflation had moderated since the June monetary policy statement.

"This slowdown is most likely due to the LVR (loan-to-value) speed limits and interest rate rises as well as the annual winter seasonal downturn," spokeswoman Andrea Rush said in a statement. "However, the Reserve Bank has now said it will take a break in rate rises for the moment and banks are advertising that they will negotiate on lending to those with deposits of less than 20 percent."

While today's figures show a slowdown in the annual rate of increase, property values rose 2.3 percent in the three months ended July 31, accelerating from the 2.1 percent pace in the June quarter, and a 0.7 percent three-monthly pace in May.

Low equity home loans dried up after the Reserve Bank imposed the restrictions, accounting for as little as 3.6 percent of new lending in March, but have since crept back up to 6.7 percent in June, according to central bank data.

QV said Auckland property values rose 2.1 percent in the three months ended July, slowing from a 2.7 percent three-monthly pace in June, and were up 11.7 percent annually.

Values in Wellington fell 0.9 percent in the three month period, and were up 1.2 percent annually, while Christchurch city values increased 2.1 percent in the rolling three-month period, and were up 6.5 percent from a year earlier.


Comments and questions

You have to read through all the real estate spin here.
You can't have sales collapse versus the "same periods in 2012 and 2013" and then claim it is due to "winter slowdown". This is a winter to winter comparison. And because it is like for like it reflects a collapse in demand.
And if you read the QV release you see their comments about houses sitting on the market with no offers because of the disconnect with seller expectations. And you also see that prices are now falling in some suburbs in Auckland (Ak City, City East, North Harbour).
The peak has passed - it was last September and up to now we have been working through the tail of transactions funded by those who sold out in the peak, and some residual offshore demand.
The fall is now here. It will be accentuated when the dairy price collapse filters through to falling economic growth and lower spending later this year (the price fall is already impacting investment and spending decisions by farmers today!). We are an over-leveraged country reliant on a one trick pony (or should that be cow) to earn our way in the world.
Successvie NZ governments have been asleep at the wheel allowing households to leverage themselves to the eyeballs on mortgage debt and all the while relying on a magical generous benefactor in the form of China that would supposedly buy all our milk products at egregious prices ad infinitum. Well, surprise! Other countries can raise cows and produce milk. And China can also buy from them. And China growth can in fact slow down (China currently faces its own pending decade of difficulty as it tries to manage down its mother-of-all-credit-bubbles).
We need to use the last of our current growth window (before it closes) to put in place a sensible mix of policies that removes the investment preference for property, restricts or taxes foreigners who want to buy property here (to ensure they can't free ride at our expense), encourages investment in industries other than dairy and farming, and promotes education in the right areas (less lawyers, more scientists and engineers). And one that doesn't involve raising taxes on residents and discouraging entrepreneurship through unnecessary growth of the government and red tape.
No-one is offering this mix today unfortunately and it makes me depressed about where we are going to be in as little as 3-5 years time from today.