The New Zealand residential property market executed a virtually perfect landing during 2007, with annual median price growth rates slowing just gradually enough to avoid eroding values, according to the Real Estate Institute of New Zealand Inc. (REINZ).
The national residential property market finished the year (November to November) up 6.66 per cent nationally compared with the annual growth rate a year before of 10 per cent.
“That levelling off was important to the market in 2007 because despite the many predictions of a market decline, the market always enjoyed sufficient demand from buyers and confidence on the part of sellers that neither party was prepared to trigger any wholesale reversal in the trends built up over the last 7 years”, according to REINZ National President Mr Murray Cleland.
“Various factors influenced the market, including reduced immigration on previous years, rapidly rising new home construction costs and higher mortgage interest rates, but values held up despite a year of considerably reduced sales volumes, compared with the boom 2003 – 2006 period.
But the Institutes’ annual tally of growth rates for regions, provinces, cities and towns, produced one, somewhat surprising, but undeniable winner for 2007 – Gore.
Recalling visions of the fable, “The Hare and the Tortoise”, Gore finished the year with the record for annual percentage price growth with a 42.58 per cent increase in its median price from $128,000 in November 2006 to $182,500 to November 2007.
In second place was Invercargill, up 23.21 per cent from $168,000 to $207,000.
Mr Cleland said it was interesting to chart the trend over the last decade or so, with values remaining pretty flat in the years to November 1998, 1999, and 2000 with the national median prices for those periods increasing from $168,000 to $172,000 and then $174,000.
The following year, 2001, the trendline for small annual increases remained intact with a national median of $176,000, but during 2002 values took off, ending the year to November 2002 with a national median residential price of $195,700.
The next three years from 2003 to 2006 saw the national median price increase by almost $100,000, from $235,000 to $330,000.
“This year the increase is still significant, from $330,000 to $352,000, but the lower percentage increase is indicative of the market flattening out and finding its own level.
Mr Cleland said that a feature of the recent property cycle was that many regions experienced strong growth in values at an early stage, with larger cities and their immediate suburbs being the first to experience strong median price growth. Areas such as Auckland, Wellington and some of the sought-after resorts such as Nelson, parts of Hawkes Bay and Central Otago, were early winners.
In the year to November 2007, Southland was the leading region, with its median up from $155,000 to $209,025, an increase of 34.85 per cent.
Second was Manawatu and Wanganui region up 9.62 per cent from $208,000 to $228,000, with Central Otago Lakes in third, with a 9.55 per cent increase from $392,500 to $430,000.
Canterbury and Westland region was fourth at 8.46 per cent with a median up from $289,500 to $314,000 while Northland was in fifth place with a 7.89 per cent increase from $285,000 to $307,500.
“But in the latter part of the cycle we have seen a catch-up period where as prices rose in the larger cities and more populous provinces, buyers have looked further out and found that prices had yet to move to the same extent in the peripheral areas.
Mr Cleland said that classic examples of this included, Northland, Manawatu and Wanganui and Southland, which had led the annual growth rate figures for most of 2007.
Following Gore and Invercargill in the list of ten greatest median price growth figures for 2007 for provinces cities and towns (but excluding ‘country’ areas because of low sales volumes affecting median prices) was the Wairarapa, up 25 per cent, then the West Coast, up 21.29 per cent, North Canterbury up 21.12 per cent, followed by Timaru up 15.12 per cent, Tauranga up 15.44 per cent, Whangarei up 15 per cent, Wanganui up 14.97 per cent and Palmerston North up 12.69 per cent.
Download full article: REINZ Annual Review Release 2007 _2_.pdf