Record Summer In Store For Scorching Hot NZ Property Market
The NZ property market has shown no signs of letting up through the final month of the year, with near-record growth registered across the country, according to the most complete and robust measure of property value change, the CoreLogic House Price Index (HPI).
The HPI for December shows nationwide property values continued to accelerate over the month, increasing by 2.6%. This takes growth in the final quarter of the year to 6.1% - a rate not bettered since the three months ending February 2004 (6.6%).
In Tauranga the quarterly rate of growth exceeded ten percent (10.2%), which is an extraordinary figure and something last witnessed in May 2004 (10.5%), when the average property value was just over $350,000. That average value has now increased to $876,122 – up from less than $800,000 at the end of September 2020.
The quarterly rate of growth in Masterton is yet another step higher at 17.4%, while other provincial centres to exceed 10% quarterly growth include Whanganui (11.2%), Porirua (10.9%) and Gisborne (10.4%) with Palmerston North just shy at 9.6%.
Looking back to the start of the year, property values in Gisborne have increased by more than thirty percent (30.4%), which has seen the average property increase in value by almost $120,000 to smash the half million dollar mark at the end of December ($514,212).
The factors influencing such a rapid rate of capital gain include record low mortgage rates and tight inventory which has seen demand outweighing supply. Stronger than forecast economic conditions have buoyed consumer sentiment at a time of unprecedented global uncertainty. It is clear that New Zealanders are looking towards property as a safe investment and the most attractive asset for wealth accumulation.
Furthermore, areas with a lower average value typically mean a greater number of eligible buyers and hence greater competition leading to stronger growth.
With consistent messages regarding the need to protect that wealth, coming from both the Government and the Reserve Bank of NZ (RBNZ), the risk factor of property investment has, on the face of it, reduced, which only encourages greater investment.
Without any major policy change regarding property in the works, the long term affordability of the property market is reliant on significantly increasing supply, which is a slow moving factor. So for now, all indications are that the fervent growth in property values will continue throughout the summer at least.