Christchurch Real Estate: February Update
Harcourts’ South Island Regional Manager, Jim Davis, comments on the Christchurch real estate market.
The figures have just been released relating to the real estate market New Zealand wide and what an interesting and mixed message it presents. In a nutshell, across most of the country sales volumes are down and with sale values still rising, thankfully at a more moderate rate. Over the past year or two we have seen continual pressure on property values and continuing price rises in terms of the value of property. With the changes brought in by the Government pre-Christmas looking to curb property price rises, along with the change in other economic factors, the expectation was that the property market would slow. For most people, a slowing in the property market means that property price growth would stop or potentially retract. The changes brought into play and other outside factors are influencing the market, but perhaps not fully in the way originally intended. While the numbers of properties sold has slowed in the last couple of months, the data shows that price growth has continued, even on lower sales volumes. Traditionally as the market volumes slow, we might normally expect to see prices stabilise or potentially fall, however that has not happened so far and perhaps looks less likely in the short term.
Right across New Zealand we see from the newly released data that the median sale price across all regions has increased, with all reporting new record highs. Along with this price growth has come increased stock levels as more property has been made available, coinciding with the drop in sales numbers. Much has and will continue to be made of this increase in available stock, however the levels are still considerably lower than what might be considered a ‘normal market’ in ‘normal times’ so the additional stock availability is not affecting prices yet.
When you look at the figures relating to Christchurch, our new reported median is $731,000, up from the $695,000 reported in January. Sales volumes were reported as 559, down considerably from the 760 in February last year. From all the data and current media reporting there is no doubt a confusing picture is emerging, and the latest global uncertainty affecting the world will not be helping either the situation or anyone’s predictions. As a buyer or a seller in the current marketplace, how do you decide what action you should take and when?
It is now widely reported and suggested that buyer urgency has left the market and we are seeing a standoff developing between buyers and sellers. No doubt if you are a buyer currently anywhere around the country you will be hoping that is the case, and that a slow down will lower property prices to make things easier for you. Equally if you are looking to sell a property, you will be hoping that prices remain strong so that you maximise the return from your sale. How anyone makes sense of all the conflicting opinions is the $64 question.
While I can’t be 100% certain what will happen in the market going forward, my 34 years of experience in the Christchurch and South Island marketplace leads me to believe that we have not seen the last of a strong property market locally, and here is why.
I think the current ‘slow down’ is an immediate reaction to the changes introduced by the Government in the run up to Christmas. Buyers were hoping for something to happen that favours them for a change, however the newly introduced bank rules have made it harder for first home buyers in particular. Already the Government is reportedly looking at tinkering with the rules again as they do not want to be seen to be making life harder for first home buyers. Equally, the investor market is just as crucial in the economy now. The Government needs property in the rental pool urgently and they have incentivised the investor market to provide it with new builds via the new depreciation policies. Now logic tells me that over the last few months neither the first home buyer nor the investor have left New Zealand, they have just stepped back from the market a bit to play a waiting game, hoping that prices might drop or lower. At the same time, we see publicity around potential rises in interest rates. Anytime we see this, we typically also see the market in general take a collective breath for a month or so before deciding that this is the new norm and getting back to business once again.
The regular owner/occupier of a property who wishes to upgrade or downsize will continue to operate in literally any market. Any pause in their activity for them is typically temporary while they adjust to any changes happening around them, and it’s that section of the market that has remained active over the last month.
We know that the market over the last year or so has been crazy, but that is only in relation to property prices and speed of sale. The actual number of sales occurring has been very average in comparison to monthly sales data from the last 10 years. The speed and rising prices were a direct result of the huge number of people wanting property to live in. That aspect of our market has not suddenly gone away in the last two months, in fact it is likely to be exacerbated in my opinion. We know and hear of the huge need for social housing as the Government houses so many in motel style accommodation around the country. Pressure on this supply is unlikely to alter with the current cost of living crisis. Equally we are now just removing MIQ restrictions on returning Kiwis and further tinkering with these rules is reportedly being considered as we speak, potentially opening the country up to all returning residents earlier than anticipated. The addition of an extra 30,000 bodies in the country will only add to the housing pressure in my opinion. The talk of a large brain drain for New Zealand is a distinct possibility as borders reopen, but I suspect most of those will not be homeowners putting stock back into the market.
The final nail so to speak are the supply chain issues in our building industry. There is no doubt in my mind that if we are to curb price growth, the Government needs to reinvigorate the supply chain issues affecting our building industry. Until that happens and we see a rapid growth in our housing stock, this buyer pressure will remain. A solution to the supply issues affecting the building industry will also not be resolved overnight and will likely take a year or two to resolve.
When you take all this into account, then throw in the publicity that Canterbury is now also seen as the preferred lifestyle, employment, growth and living option within the country, it is hard to see our property prices falling significantly in the short term. I think we will see renewed pressure here in Canterbury as the stock shortage intensifies.
The real substantial head wind against the continuing price growth is the uncertain global issues that have started within the last few weeks due to the invasion of Ukraine. In a nutshell, I expect to see the volume of sales decrease further as a result of the pressure and indecision in the country. However, I still expect property price stability to remain for the foreseeable future in our patch; time will tell if I am right.
Taking all this into account, what you do from here as a seller becomes vital. Picking the right brand and the right company can have a huge effect on the result of your sale process. There is no doubt that there is uncertainty and between some of the global and local issues, the situation and the market could change dramatically and very quickly. Harcourts in Christchurch continued to perform strongly over the last month and the results speak for themselves:
Christchurch Median $731,000 Harcourts Median $785,000
Christchurch Ave sale price $846,596 Harcourts Ave sale price $915,582
We know our market and as a company and a brand, we pride ourselves on the results we achieve on your behalf. To get the best possible result for your property sale in these everchanging times, talk to the company with the best track record for results and a company that knows the market. Rest assured if you are listed with Harcourts…we’ve got this.