PHOTO: The homes.co.nz Monthly Property Update
Is the impact of property prices falling less than you think?
With economists predicting a house price drop of 5-10%, the team at homes.co.nz looked at when house prices were last at these levels. Although a 10% decrease in property prices is a significant correction, it is worth considering these potential decreases against recent capital growth. The graph below shows the property price trends across New Zealand’s main centres.
Across much of the country we have seen very strong growth in recent times. The Median HomesEstimate in Dunedin has increased by almost 20% in the last year, while property values in Wellington and Hamilton have all seen growth approaching 10% p.a.
This provides a bit of perspective around how much proposed price drops are likely to impact New Zealand homeowners. In many areas, a 5% drop would only wipe away the capital gains generated in the few months.
With such strong growth, even a 10% drop is only unwinding the gains generated in the last year or two. Property prices in Dunedin, for example, have increased 19.8% in the last 12 months and we only need to look back to Nov 2019 to when prices were 10% less than they were today.
The exception to this is Christchurch and Auckland where the market has been relatively flat. A drop in prices will likely be felt more in these areas (particularly in Auckland where many are highly leveraged) as people have generated less capital gains in their properties over recent times. However, even Auckland has seen a recent resurgence in the first quarter of 2020 and many believe the Christchurch market is undervalued and is unlikely to experience as large a decrease as some areas.
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