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Quarterly Property Market & Economic UpdateNew ZealandQuarter 1, 2019

2 | CoreLogic Quarterly Property Market & Economic Update New Zealand Q1 2019

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About CoreLogic 3

CoreLogic Data and Analytics .................................................................................................................................................................... 3

Legal Disclaimer ............................................................................................................................................................................................... 3

Executive Summary ........................................................................................................................................................................................ 4

Macro Economic and Demographic Indicators 5

New Zealand Asset Classes ......................................................................................................................................................................... 6

NZ and Australia GDP Growth .................................................................................................................................................................... 7

New Zealand Population ............................................................................................................................................................................... 8

Migration ............................................................................................................................................................................................................. 9

Regional Building Consents ......................................................................................................................................................................... 10

Consumer Confidence ................................................................................................................................................................................... 10

Employment ....................................................................................................................................................................................................... 11

Interest Rates .................................................................................................................................................................................................... 12

Housing Overview 13

Lending Conditions ......................................................................................................................................................................................... 14

Sales Volumes ................................................................................................................................................................................................... 15

Listings ................................................................................................................................................................................................................. 16

Nationwide Values ........................................................................................................................................................................................... 18

House Price Index ............................................................................................................................................................................................ 19

Rent ....................................................................................................................................................................................................................... 22

Buyer Classification ......................................................................................................................................................................................... 23

Main Cities Housing Market Indicators 24

Auckland Market Activity ............................................................................................................................................................................. 26

Auckland Values ............................................................................................................................................................................................... 27

Auckland Suburb Value Change ................................................................................................................................................................ 28

Current Auckland Suburb Values .............................................................................................................................................................. 30

Hamilton Market Activity .............................................................................................................................................................................. 32

Hamilton Values ................................................................................................................................................................................................ 33

Tauranga Market Activity .............................................................................................................................................................................. 34

Tauranga Values ............................................................................................................................................................................................... 35

Wellington Market Activity ........................................................................................................................................................................... 36

Wellington Values ............................................................................................................................................................................................ 37

Christchurch Market Activity ....................................................................................................................................................................... 38

Christchurch Values ........................................................................................................................................................................................ 39

Dunedin Market Activity ................................................................................................................................................................................ 40

Dunedin Values ................................................................................................................................................................................................. 41

Contents

CoreLogic Quarterly Property Market & Economic Update New Zealand Q1 2019 | 3


About CoreLogic

CoreLogic is a leading property information, analytics and services provider in the United States, Australia and New Zealand. CoreLogic helps clients identify and manage growth opportunities, improve performance and mitigate risk, by providing clients with innovative, technology-based services and access to rich data and analytics.

Whilst all reasonable effort is made to ensure the information in this publication is current, CoreLogic does not warrant the accuracy, currency or completeness of the data and commentary contained in this publication and to the full extent not prohibited by law excludes all loss or damage arising in connection with the data and commentary contained in this publication.

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Executive Summary

The first three months of 2019 delivered pretty much the same property market performance as for most of 2018 - sluggish sales activity and consistent (yet controlled) value growth – with the notable exception of Auckland. It wouldn’t be any surprise to see more of the same for the rest of 2019.

First, the macroeconomic environment remains supportive. Yes, GDP growth has slowed and will probably ease down a bit further. But at 2-2.5% both this year and next, growth will still be respectable (and probably higher than Australia’s figures of perhaps 1.5-2%). The labour market is another strong foundation for property sales and prices in NZ, with unemployment low. Limited wage growth isn’t however doing much to help improve housing affordability.

Second, the lending environment is favourable for borrowers – provided of course that they can meet the deposit, income/expense, and debt serviceability tests. For a start, the next move in the OCR now looks likely to be a short term cut (in May or August) rather than a longer-term rise. That will at least help to keep mortgage rates low, even if they don’t fall much further. The intense competition in the banking sector to either win new borrowers or capture market share at refinancing time from other lenders is also leading to some really attractive deals for borrowers, e.g. sub 4% two year and three year fixed rates.

The recent rise in lending volumes (by value) has been driven largely by first home buyers (FHBs), with greater than 80% LVRs drawing down larger average loans (rather than more loans). The sector is however still operating well below the mandated speed limit, which determines that no more than 20% of owner occupier loans can be at >80% LVR. It therefore seems unlikely that the Reserve Bank will be especially concerned just yet. In fact, there would still seem to be some impetus for overall lending volumes yet to come from the higher LVR segment.

Within the relatively quiet overall market nationally, it’s FHBs and mortgaged investors that are of most interest according to our Buyer Classification series. Their shares of purchases were 24% apiece in Q1 - putting FHBs well above normal levels, and investors making a return to form, even if still below past levels. Anecdotally, some investors are reported to be exiting the sector and selling to FHBs. But there’ll also be other investors simply snapping up sales to boost their own portfolios, so it’s hard to envisage that the stock of available rental property is about to change much anytime soon.

Looking specifically at Auckland, it’s not hard to see why values have dipped by 1.5% over the past year and why further modest falls could occur. Affordability is still low (FHBs are still managing to buy using their KiwiSaver funds and/or compromising on location/property type), listings are high and buyers aren’t in any rush.

A key theme to watch relates to policy intervention in the housing market from both the Government and Reserve Bank. The prospect of a broad-based capital gains tax in 2021 has been ruled out, but the effects of last October’s Foreign Buyer Ban seem to be playing out in softer sales activity, while the tax ring-fence for rental property losses is currently going through the parliamentary process. Although not yet law, when it does pass, it will apply to the current tax year (starting from April 1st) – so investors will need to be factoring this into their sums right now. Then out on the horizon we have the potential requirement for banks to hold more capital on their balance sheets, and hence have less money to lend out. We also need to keep an eye on KiwiBuild and how that might impact supply.

Overall, although the NZ property market is on a relatively solid footing, sales volumes are likely to remain subdued in 2019. National average prices may edge up by about 3% from their current level of $686,523. Auckland however looks set for further weakness.

As always, we keep a running monitor on the property market every week via our NZ Property Market Pulse articles, so be sure to check these out on our website http://www.corelogic.co.nz/news-research/all-news/



http://www.corelogic.co.nz/news-research/all-news/




Macro Economic and Demographic Indicators




New Zealand Asset Classes

The value of residential property remains above one trillion dollars, with mortgages secured against 24% of this value. In other words, 76% of the value of the property market is household equity.

The commercial & industrial property sector ($212bn) is much smaller than residential, as is the value of the share market and the country’s superannuation savings.

Sources: CoreLogic NZ, Reserve Bank of NZ, NZX, NZ Super Fund, Financial Markets Authority

RESIDENTIAL REAL ESTATE

$1.1 trillion$264 Billion in home loans

COMMERCIAL/INDUSTRIAL REAL ESTATE

$212 billion

NZ LISTED STOCKS

$146 billion

NZ SUPER & KIWISAVER

$94 billion




NZ and Australia GDP growth

New Zealand’s economy expanded by 0.6% in the final quarter of 2018, double the figure in Q3 (0.3%). This result was driven by the services sector - which includes retail, business services, and tourism. By contrast, goods-producing activities lagged a little behind in the fourth quarter.

During the 2018 calendar year, the economy expanded by 2.8%: slower than 3.1% in 2017 but hardly a disaster. That said, growth is anticipated to cool again in 2019 (perhaps to about 2%), as migration eases and the construction impetus from previous events such as the Christchurch and Kaikoura earthquakes fades further. However, NZ may remain slightly ahead of Australia in both 2019 and 2020 in terms of GDP growth.

Annual Average GDP Growth (%)

Source: Reserve Bank of New Zealand, Capital Economics

-3

-2

-1

0

1

2

3

4

5

6

7

8

1990 1994 1998 2002 2006 2010 2014 2018

NZ

Australia

Capital Economics forecast




New Zealand Population

Population growth slowed again in the fourth quarter of 2018, from about 1.9% annually to 1.7%. This was the slowest growth rate in four years, and acts as a natural handbrake on the housing market.

Once again it was net migration that pulled the overall growth rate down. In 2017, net migration added 70,000 people to our population, whereas that figure dropped to less than 56,000 in 2018.

At 26,000, natural population growth (births minus deaths) in 2018 was barely changed from 2017, and still in the 25,000-30,000 range that it’s been in for several years now.

Quarterly Change in National Population (persons per quarter)

Annual Change in Population (persons)

Population Change Composition (persons per quarter)

Source: Statistics New Zealand

0

5,000

10,000

15,000

20,000

25,000

30 ,000

35,000

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018

Quarterly population change4 quarter moving average

-10,000

-5 ,000

0

5,000

10,000

15,000

20,000

25,000

1996 1999 2002 2005 2008 2011 2014 2017

Natural increaseNet migration

91600

38700

3900

3500

3600

7000

1900

New Zealand

Auckland

Hamilton City

Tauranga City

Wellington Cit y

Christchurch City

Dunedin City



Migration

Unfortunately the net migration statistics are not as useful at present as they have been in the past, due to a change in the collection methodology and the tendency for big revisions to be made each month. Previously, migration was estimated on an ‘intentions method’ (what people said they planned to do). It’s now calculated on an ‘outcomes method’ (what people actually did). Because actual outcomes are not known for at least a year after a migrant arrives or departs, recent patterns must be statistically estimated/modelled, and that gives rise to uncertainty and revisions.

The trans-Tasman balance is also no longer available, because of a conscious choice by Statistics NZ to no longer track migration by residency (although they still track it by citizenship). District-level migration flows will still be available on the new method, but just not yet.

The bottom line is that the net migration figures need to be treated with caution at present. However, taking them at face value (with the caveats firmly still in mind), NZ has had a net migration inflow of almost 61,600 people over the past 12 months, an increase of about 10,000 from a year ago – driven by more arrivals and flat departures. This rise in net migration would have resulted in higher property demand and prices than otherwise would have been the case.

Long term migration (12-month rolling totals)

Comparison of old and new net migration series (12-month rolling totals)

Net Gain Last Year % Change

TOTAL ALL AREAS 62,733 -11.6%

Auckland Region 31,417 -13.7%

Hamilton City 1,887 -2.0%

Tauranga City 735 -24.1%

Wellington 2,917 -16.7%

Christchurch City 4,722 -13.5%

Dunedin City 899 -15.2%

Main Urban Area (Other) 4,719 -14.3%

Rural Centres 3,713 -23.0%

Not applicable/Not stated 11,724 3.4%


*Note that these figures relate to Q3 2018. The next publication date for these figures from Statistics NZ is yet to be advised.

- 30,000

- 20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2002 2006 2010 2014 2018

-4 0,00 0

-20,00 0

0

20 ,000

40 ,000

60 ,000

80,000

100,000

120,000

140,000

160,000

180,000

20 02 20 06 2010 2014 2018

NetArrivalsDepartures




Consumer Confidence

Regional Building ConsentsThe boom in residential building consents has continued over the past three months, with Statistics NZ’s trend measure (which smooths out seasonal and other fluctuations) showing that in the year to February 2019 more than 34,100 new dwellings were approved to be built. That was 8.8% higher than a year ago, itself already a high figure (31,375). This is the first time that consents have broken above 34,000 annually on this measure.

Auckland remains the key growth area, although the Waikato and Wellington regions have also been contributing. By property type, it’s been smaller dwellings (e.g. apartments, flats) driving the growth, particularly in Auckland. Indeed, more than half of the recent consents in Auckland have been small dwellings, with these properties in our biggest city now making up more than 20% of all consents across New Zealand. This is a good thing from the point of view of housing a growing population.

It’s important to note however that as many as half of the recent consents in Auckland have simply been replacing demolished properties, so we’re cautious of the emerging view that the city’s shortfall is starting to be eroded more significantly. Very few of the new-builds in Auckland are going into lower value segments either, so there’s still a clear case for some kind of intervention (e.g. KiwiBuild).

New dwelling consents trend (consents per month)


After a lull in the middle of last year, consumer confidence on the ANZ-Roy Morgan measure has edged higher over the past few months, reaching 121.8 in March. That’s a couple of points above the long-term average, albeit below where confidence was a year ago (128.0 this time last year).

It can sometimes be a little tricky to disentangle all of the various influences on consumer confidence, but given that unemployment is still low and mortgage rates are very favourable it’s not too hard to explain slightly above-average levels of sentiment at present. At the margin, this should support activity in the housing market.

Source: ANZ NZ, Roy Morgan

ANZ-Roy Morgan Consumer Confidence (index, monthly)

0

200

400

600

800

1,000

1,200

1995 1999 2003 2007 2011 2015 2019

0

20

40

60

80

100

120

140

160

2004 2007 2010 2013 2016 2019



The slowdown in employment growth continued in the fourth quarter of 2018, with the year-on-year figure falling from 2.9% in Q3 to just 2.4%. That was the slowest rate since the first quarter of 2016. Full-time employment growth slowed from 3.6% year-on-year to 3.1%, while part-time employment actually fell by 0.4% in the year to Q4 2018. A drop in that figure hadn’t occurred since Q3 2013.

That said, we need to bear in mind that employment growth has been strong for an extended period and as the number of people employed rises (and fewer people are unemployed), it’s simply not possible to keep employment growing at the same rates as before. Indeed, the labour force participation rate - the share of the working age population that are either employed or looking for work - continues to hover at about 71%, a record high. The unemployment rate remains below 4.5%, on a par with previous record lows.

In other words, the labour market is still robust and actually, there are shortages of labour in certain industries (such as construction). This provides a solid base for the property market, both in terms of sales volumes and property values. With most people in work, the risks of repayment problems and mortgagee sales are low.

Employment Annual change in employment, full time and part time

Labour force participation rate (%)

Unemployment Rate


-8 %

-6 %

-4 %

-2%

0%

2%

4%

6%

8%

10%

1987 1990 1994 1998 2001 20 05 20 09 2012 2016

58

60

62

64

66

68

70

72

1986 1989 1993 1997 2000 20 04 20 08 2011 2015

0

2

4

6

8

10

12

1986 1989 1993 1997 2000 2004 20 08 2011 2015




The latest OCR review from the Reserve Bank surprised most analysts by flagging that a near term rate cut (rather than a longer term rate rise) is more likely to be the next move. The timing of that potential cut remains uncertain, but could be as soon as May, or failing that, August.

The Reserve Bank’s OCR projections shown in the charts here pre-date that announcement, but even though they don’t contain a rate cut in the future path shown, the key message is the same: official interest rates will be low for some time to come, and this bodes well for borrowers. It’s an even more favourable environment for borrowers when you also consider the intense competition between banks at present (witness the re-emergence of mortgage rate wars). In turn, this will underpin a decent level of property sales and support house prices.

However, there are some upside risks to mortgage rates over a 3-5 year horizon. Most importantly, the Reserve Bank is likely to impose extra capital requirements on banks and it’s been estimated that this need to for them to hold more money on their balance sheets could force up mortgage rates by about one percentage point.

Of course, many recent borrowers will be well prepared for that anyway, given that they’ve already had to pass tougher serviceability tests to get their loan in the first place (such as satisfying the bank that they could still service the mortgage at a theoretical interest rate of 7-8% not just the current 4-5%).

Interest RatesMortgage Interest Rates (%)

Average Two Year Fixed Rates (%)

Official Cash Rate and Mortgage Rates (%)

Sources: Reserve Bank of New Zealand and interest.co.nz

0

2

4

6

8

10

12

20 00 20 03 20 06 20 09 2012 2015 2018 2021

4.50 %

4.60 %

4.70 %

4.80 %

4.90 %

5.00 %

5.10 %

5.20 %

0

5

10

15

20

25

1965 1971 1977 1983 1989 1995 2001 2007 2013 2019

Floating mortgage interest rates2 year fixed rate



Housing Overview




Lending conditionsGross new lending has continued to rise over the past three months, with February’s mortgage lending figure ($4.8bn) up by about $130m from a year earlier. That extended the run of increases to 11 months (and the 13th in the past 14 months), with larger average loans rather than a rise in the number of loans being the key driver.

By borrower type, the overall increases in mortgage lending continue to be driven by owner-occupiers, with investors still showing broadly flat volumes year-on-year. In February, for example, the flow of lending to owner-occupiers was $3.9bn, about $280m higher than a year ago. By loan type, the share of lending on interest-only terms remains far lower (28%) than it was at the peak in May 2016 (41%).

Much of the growth in lending lately has been driven by first home buyers (FHBs) with less than a 20% deposit. However, we doubt that the Reserve Bank will be overly concerned about this just yet. First, given the banks’ current strict lending criteria (e.g. income and expense testing, debt servicing ability), those FHBs getting loans will tend to only be the ‘best’ borrowers anyway – and they’re more likely to keep servicing the debt in the (unlikely) event of a major economic/property downturn.

Second, the LVR speed limits remain some way off in the distance. The current speed limit for high LVR owner-occupier borrowing is 20% – but the actual figure for February was down at just 12%. (Note that the figures for investors at the new speed limit, i.e. a 5% cap for borrowers with less than a 30% deposit, or 70% LVR, are not available until July. The lending flows at the old 65% LVR mark have been discontinued.)

Looking ahead, the rise in mortgage lending looks set to roll on, giving support to sales volumes and property values. Competition amongst the banks will stay pretty intense and this will lead to more attractive deals for borrowers. With more than 80% of mortgage debt in NZ on a fixed interest rate, household finances also look relatively resilient.

Annual Change in Gross New Lending Flows ($m per month)

High LVR Lending to Owners and Investors (% of new lending)

Source: Reserve Bank of New Zealand

Refinancing Profile for Mortgages (% of stock)

-2,500

-2,000

-1,500

-1 ,000

-500

0

50 0

1,000

1,500

2016 2017 2018 2019

Investor

Owner-occupier

0%

5%

10%

15%

20 %

25%

Oc t 16 Feb 17 Jun 17 Oct 17 Feb 18 Jun 18 Oct 18

0%

5%

10%

15%

20 %

25%

30 %

35%

40 %



Sales Volumes There were 7,973 property sales across NZ in March, down by 12% from a year earlier and the lowest number for the month of March since 2011. Auckland was even weaker, with sales down by 16% from a year ago. In other words, it’s still a pretty soft property market in terms of volumes, both nationally and in Auckland.

However, to an extent there are different reasons for this. Around most of NZ, the stock of listings available on the market is relatively low, so sales activity is being restrained more by a lack of choice for buyers rather than an absence of demand. In that environment, it’s not surprising that values are rising.

In Auckland, however, listings are high, so the lack of sales can be attributed to soft demand. Indeed, the choice available to buyers in Auckland means that they don’t need to rush – and equally, with unemployment and interest rates low, vendors generally aren’t desperate either. So days to sell is rising and sales themselves have dropped. For vendors that do need to sell, prices are dipping a little.

The Foreign Buyer Ban is probably also playing a role in reducing turnover, but at the same time this will also have at least opened up some opportunities for would-be domestic buyers to return to the market.

Nationwide Sales Volumes (monthly total)

Regional Sales Volumes (year-on-year % change)

Nationwide Annual Change in Sales Volumes (%)




ListingsAs per normal, new listings rose in January and February as the market resumed after the holiday period. However, they’ve peaked for this season now and will tail off further as winter sets in. Compared to a year ago, the still-tight markets in Wellington and Otago have at least started to see more of a response from would-be vendors, with new listings rising in response to the growth in prices.

New Listings Average last 3 weeks 1 month change 1 year change

New Zealand 2,295 -7% 8%

Auckland 671 -11% -8%

Waikato 237 -15% 5%

Bay of Plenty 171 -14% 4%

Wellington 216 0% 27%

Canterbury 331 -12% 10%

Otago 127 -6% 48%

New listings (three-week rolling total)



ListingsTotal listings across NZ as a whole are 7% higher than they were a year ago, driven by Otago, Auckland, and to a lesser extent Waikato and Wellington. In Auckland, listings were already high, so this is just an added headwind for values (which have already drifted a little lower in the past few months).

But in Otago and Wellington, listings were starting from a low base, and so the recent rises probably won’t be enough to take the steam out of property value growth just yet. The stock of property on the market (i.e. listings) is pretty much unchanged from a year ago in Canterbury.

New Listings Average last 3 weeks 1 month change 1 year change

New Zealand 32,372 2% 7%

Auckland 11,121 2% 14%

Waikato 3,551 5% 9%

Bay of Plenty 2,290 3% 6%

Wellington 1,697 6% 8%

Canterbury 4,965 -2% 1%

Otago 1,327 3% 18%

Total listings




Nationwide ValuesAverage Value of Housing Stock - New Zealand ($)

Annual and Quarterly Change in Value (%)

National average property values increased by 2.6% in the year to March 2019, a slowdown from the figure of 3.0% recorded in February. That dip in growth may have been small, but it took the figure down to its slowest pace since December 2011 (2.3%), when the market was finally accelerating and permanently emerging from the GFC-induced lull.

Of course, although they’ve slowed, values are still growing – boosted by a rising population (albeit also slowing), the undersupply of properties, and low unemployment and mortgage rates. Indeed, at more than $686,500 in March, the average property in NZ hasn’t become any more affordable in recent months. A year ago, the average property was about $17,400 cheaper (at around $669,100).



House Price IndexDunedin is still easily the strongest of the main centres in terms of property value growth, with an increase of 13.3% in the year to March. Wellington is also rising steadily, with average values up by 8.4% over the past 12 months. Robust demand and a tight supply of listings on the market are boosting values in both places. Meanwhile, Tauranga and Hamilton are still seeing rising prices, just slower than Wellington and Dunedin.

By contrast, Christchurch remains a flat market, with value growth hovering around zero (0.6%y/y in March), as it has done for about two years now. In Auckland, property values have weakened over the past few months, and were down by 1.5% in the year to March – that’s the biggest annual fall for a decade, with values being held back by low affordability, lots of listings and no rush from buyers.

March 2019

Current Value 3 months 12 months Since 2007 peak

New Zealand $686,523 0.5% 2.6% 66%

Auckland $1,039,917 -0.8% -1.5% 91%

Hamilton $580,285 1.6% 4.5% 61%

Tauranga $733,102 1.7% 3.7% 52%

Wellington $702,896 2.2% 8.4% 54%

Christchurch $497,298 0.1% 0.6% 31%

Dunedin $451,199 3.7% 13.3% 58%

Average Dwelling Value ($)

Source: CoreLogic NZ QV Monthly House Price Index




House Price IndexAnnual Value Change (%)

Over the past 12 months, the sluggish markets in Canterbury and Auckland (as well as the West Coast of the South Island) can be clearly seen on a map view. By contrast, the stronger markets have tended to be in the central and eastern parts of the North Island, and to a lesser extent in Otago and Southland.

*Size of bubble represents the number of properties in the Territorial Authority



Three Month Value Change (%)

*Size of bubble represents the number of properties in the Territorial Authority

The emerging weakness in Auckland is the clearest feature of the timelier three month changes in values, with several parts of the wider city/region showing blue (modest price falls). Most other parts of the country look stronger, other than again Canterbury and parts of the upper South Island.




Rent

National rents averaged $433 per week in the three months to March 2019, up by 6.0% from $408 a year earlier. Rental growth has ticked up a few notches in the past few months, as landlords perhaps try to recoup the extra costs imposed on them from new government measures such as insulation requirements.

However, a 6.0% annual rise in rents isn’t completely out of sync with past norms. Ultimately, any rent increases that landlords can successfully push through tend to be anchored simply by how much tenants can afford to pay – itself determined by wage growth. So with wage growth relatively limited at present, we wouldn’t envisage rental growth accelerating much further.

Several of the main centres are seeing sizeable rises in rents at present – at least 7% annually in Wellington, Dunedin, Tauranga, and Hamilton. In Wellington and Dunedin in particular, rents will be rising for the same reason as property prices – shortages of property and robust demand.

From an investors’ perspective, it will be heartening to see gross rental yields now rising, after a long period where they’ve dropped. Of course, from the troughs of 3.1% nationally in 2017, the current average yield of 3.3% isn’t exactly a huge amount higher – but given the slowdown of capital gains, at least it’s moving in the right direction for landlords.

Median Weekly Rent Annual Change in Rent Gross Yield

Auckland $526 2.7% 2.2%

Hamilton $389 7.2% 3.5%

Tauranga $466 8.0% 3.3%

Wellington $525 8.9% 3.3%

Christchurch $372 3.5% 3.9%

Dunedin $352 8.5% 4.1%

National Annual Change in Value and Rent (%)

Gross Rental Yield – National (%)

Sources: CoreLogic NZ and MBIE

-15%

-10%

-5 %

0%

5%

10%

15%

20 %

25%

1998 20 01 20 04 20 07 2010 2013 2016 2019

0%

1%

2%

3%

4%

5%

6%

1998 20 01 20 04 20 07 2010 2013 2016 2019



Buyer ClassificationBuyer Classification – New Zealand (% of sales)

NZ Property Transfers by Non-Citizens or no Resident Visa (% of total transfers)

Many of the same patterns that we saw for buyer classification in 2018 have remained in place in the first three months of 2019. Movers (i.e. existing owner occupiers who are relocating) remain slightly less of a presence than normal in terms of their percentage share of purchases, with the key areas of interest being activity from first home buyers (FHBs) and multiple property owners (MPOs) with a mortgage.

Across NZ, FHBs accounted for 24% of purchases in Q1 2019, basically unchanged from the final two quarters of 2018. However, putting that into a longer-term context, FHBs have a larger market share than at any time since 2007 – and are certainly playing a more important role than when they only made 18% of purchases back in Q1 2014. Access to KiwiSaver for the deposit and a willingness to compromise on location and/or property type (and hence access lower value housing) are factors allowing FHBs to continue in the market.

Mortgaged MPOs have arrested the slide that they experienced in the aftermath of LVR III in October 2016 (which required them to have a 40% deposit).After hitting a trough of 22% in Q4 2017, they now account for 24% of purchases. That’s the same as FHBs, whereas historically mortgaged MPOs have tended to enjoy a clear buffer over FHBs in terms of market share. One difference now is that with gross rental yields generally low, it’s harder for some would-be investors to make the sums stack up – especially since costs are rising too (e.g. extra insulation requirements, the tax ring-fence for rental property losses).

As noted, movers are just ticking along. Their share of purchases in Q1 2019 was 27%, down a touch from 28% a year ago and not really much different from historical norms. With the costs involved to move and also many with already-large mortgages, staying in the current property and perhaps renovating (rather than relocating) is a choice many people are making currently.


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2016 Q4 2017 Q2 2017 Q4 2018 Q2 2018 Q4

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

4%

4%

24%

27%

2%

6%5%5%

10%

13%

26%

24%

21%

30%

MoverFirst Home BuyerMultiple Property Owner MortgageMultiple Property Owner CashNew to MarketReEntryOther




Main Cities Housing Market Indicators







Auckland Market Activity

Buyer demand as measured by valuations activity is still subdued in Auckland, which isn’t surprising given low affordability and no real need to rush to make a purchase (because listings/choice are high).

The fascinating aspect of buyer classification in Auckland is that FHBs are the biggest individual buyer group (27% of purchases), even though the average property in the city costs more than $1m. FHBs haven’t been this important to Auckland’s demand since back in 2006-07, and the latest figures surely reflect the willingness of FHBs to move further out from the CBD or to buy a smaller dwelling.

In terms of their share of purchases, Auckland’s movers and mortgaged multiple property owners (MPOs) are less active than normal. It’s likely that many movers with already-large debts are just preferring to sit tight for now, while the low gross yields (sometimes less than 2%) on offer in Auckland are probably keeping a lid on the new demand for property from investors.

There are reasonably clear signs in these figures that the Foreign Buyer Ban is having an effect in Auckland. The market share of ‘cash MPO’ (which will cover domestic cash investors, but also some overseas buyers) has reduced recently, as has the ‘new to market’ category. People from Australia and Singapore are exempt from the ban, and foreign buyers can still invest and hold apartments in large developments – but even so, there are signs in the latest buyer classification stats that the ban has taken a reasonable chunk of foreign buyers out of the market.

Buyer Demand – Auckland (volume index)

Buyer Classification – Auckland (% of sales)

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

4% 4%

28%

7%

27%25%27%24%

6%

2%

27%

12%

MoverMultiple Property Owner MortgageMultiple Property Owner CashFirst Home BuyerNew to MarketOtherReEntry



The falls in Auckland property values in recent months (which, to be clear, are only modest so far) have been relatively widespread across the area. Only Rodney has escaped price falls on both a three-month and twelve-month horizon, with the weakest market over the past year being North Shore (down by 3.1%).

The drops in the past 12 months have been 1-2% in Papakura, Waitakere, Auckland City and Manukau, and only a minor 0.5% in Franklin.

Auckland ValuesAverage value of housing stock Auckland ($)

March 2019

Current Value 3 months 12 months Since 2007 peak

Rodney $953,096 0.2% 0.3% 62%

North Shore $1,197,945 -1.2% -3.1% 86%

Waitakere $814,078 -1.1% -1.3% 92%

Auckland City $1,230,817 -0.2% -1.1% 98%

Manukau $892,867 -1.5% -1.1% 95%

Papakura $691,235 -1.4% -1.7% 92%

Franklin $671,797 -0.3% -0.5% 70%

Annual and quarterly value change Auckland (%)




Auckland Suburb Value ChangeAnnual value change (%)



Even in a flat to slightly falling market, there’ll always be variation. Currently, the weakness of values is centred around the North and East of Auckland, with parts of the West and South faring a little better. One key reason for this will be that property is still a bit more affordable in the West and South, so buyer demand is slightly stronger.

*Size of bubble represents the number of properties in the suburb.

Based on CoreLogic Median E-valuer




Over the past five years, almost all parts of the country have seen large rises in property values. CoreLogic’s interactive ‘Mapping the Market’ product (www.corelogic.co.nz\mapping-market) shows these changes across the country, it’s freely available and updated quarterly. The heatmaps in ‘Mapping the Market’ are point-in-time snapshots from 2014 and 2019.

Auckland is illustrated in the heatmap here. There are no longer any suburbs with a median property value below $500,000 in Auckland. Five years ago, about 20% of all suburbs were below that $500k threshold. At the end of February 2014, 13.8% of suburbs had a median value of at least $1m. Now that figure has risen to 48.0%.

Current Auckland Suburb ValuesAuckland suburb values 2018 ($)

*Based on CoreLogic Median E-valuer

www.corelogic.co.nz\mapping-market






Hamilton Market Activity

Similar to the story in Auckland, mortgaged MPOs are just stepping back a bit in Hamilton, and first home buyers have come in and now account for a record high share of purchases (29%) – as well as that, they’re actually the largest individual buyer group.

Mortgaged MPOs (investors) accounted for 27% of Hamilton property purchases in Q1 2019, the lowest for more than a decade. Admittedly, at 11%, there is a little more activity from cash MPOs in Hamilton than typically tends to be the case.

Movers are also relatively inactive in Hamilton (22%), so it’s become a key first home buyer market. At 29%, FHBs’ share of purchases in Q1 2019 was the largest of any individual group, and well above their previous best of 27% back in late 2006.

Buyer Demand – Hamilton (volume index)

Buyer Classification – Hamilton (% of sales)

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

40%

3%

4%

27%27%

31%

22%

29%

1%

7%

4%

7%

11%

25%

First Home BuyerMoverMultiple Property Owner CashMultiple Property Owner MortgageNew to MarketReEntryOther



Hamilton’s average property value rose by 1.6% in the first three months of 2019, with the rise over the full 12-month period to March coming in at 4.5%.

Hamilton South East has shown the largest gain in average property values since March last year (7.0%), also recording a figure of 2.0% in the first three months of 2019 alone. The smallest gain in property values over the past 12 months has been in Hamilton North East (at 3.0%), where average values are already the highest (at more than $722,000).

Average value of housing stock – Hamilton ($)

Annual and quarterly change in value – Hamilton (%)

March 2019

Current value 3 months 12 months Since Peak

Hamilton Central & North West $535,166 1.3% 4.0% 50%

Hamilton North East $722,263 1.3% 3.0% 61%

Hamilton South East $535,462 2.0% 7.0% 53%

Hamilton South West $519,467 1.8% 4.0% 52%

Hamilton Values




Tauranga Market Activity

In terms of the main centres of NZ, Tauranga’s buyer classification make-up is different to the others. First home buyers are generally less of a presence in Tauranga, partly because house prices are high in relation to local incomes. By contrast, movers from both within the city and from elsewhere – who have more wealth and equity behind them – tend to be the key purchasing group.

Indeed, in Q1 2019, movers accounted for 35% of property purchases in Tauranga – that’s not far off previous cyclical peaks. By contrast, FHBs made just 17% of purchases, while the general drop-off in market share for mortgaged MPOs that’s been in progress since early 2016 hasn’t really turned around yet either. They accounted for 22% of purchases in Q1 2019.

Buyer Demand – Tauranga (volume index)

Buyer Classification – Tauranga (% of sales)

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

40%

3%

6%6% 6%

2%4%

33%35%

15%

12%

23%22%

16%17%

First Home BuyerMultiple Property Owner MortgageMultiple Property Owner CashMoverNew to MarketReEntryOther



Average property values in Tauranga were up by 1.7% in the first three months of 2019, taking the gain over the last 12 months as a whole to 3.7%. The level in Tauranga is now $733,102, about $26,000 higher than a year ago and $57,000 above two years ago.

Average value of housing stock – Tauranga ($)

Annual and quarterly change in value – Tauranga (%)

Tauranga Values




Wellington Market Activity

Overall activity levels in Wellington are perhaps not as high as might be thought, given that the steady growth in values that’s occurring would normally be associated with a busy market. However, it needs to be noted that listings are low – so activity is likely to have been restrained simply because of a limited supply of stock on the market actually available to buy.

The purchases that are being made are often going to first home buyers – in fact, they’re accounting for as high a share (33%) as ever before, and they’re the largest individual buyer group.

The next largest buyer group, which is mortgaged investors, are quite a long way back, with a 27% market share. Although that’s lower than normal, investors have at least made a comeback in the past few quarters, from a trough of 23% in Q4 2017. Rising rents and yields in Wellington may have helped entice some new investors into the market.

The recent comeback of mortgaged investors has come at the expense of movers, who have dropped down to just 20% of purchases. That’s lower than ever before.

Buyer Demand – Wellington (volume index)

Buyer Classification – Wellington (% of sales)

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

3%3%

5%4%

28% 27%

8% 9%

27%27%

2%

4%

20%

33%

First Home BuyerMoverMultiple Property Owner CashMultiple Property Owner MortgageNew to MarketReEntryOther



The growth in property values around Wellington region remains pretty strong across the board. The largest gains are being seen in Upper Hutt and Masterton (both 12.3% in the year to March), followed by Carterton (11.6%).

The other parts of the region are all seeing values rise by about the 7-9% range, with Porirua towards the top, and Kapiti Coast and South Wairarapa a little further back.

Wellington ValuesAverage value of housing stock – Wellington ($)

Annual and quarterly change in value – Wellington (%)

March 2019

Current value 3 months 12 months Since Peak

Porirua $597,865 1.1% 8.9% 57%

Upper Hutt $542,220 2.9% 12.3% 54%

Lower Hutt $576,086 3.0% 8.2% 47%

Wellington City $828,645 1.9% 7.9% 56%

Carterton $425,136 1.8% 11.6% 53%

Kapiti Coast $586,842 1.7% 6.8% 53%

Masterton $377,865 1.2% 12.3% 32%

South Wairarapa $514,326 2.3% 6.7% 52%




Christchurch Market Activity

Market activity levels remain subdued in Christchurch, but at least they’ve stabilised. Within that bigger picture, FHBs are the largest individual buyer group, ahead of movers.

After dipping a bit in Q4 2018 (from 29% to 26%), FHBs’ share of purchases edged back up again in Q1 2019, to 28%. With values in Christchurch having been flat for about two years now, affordability in the city has been improving, and that’s helping more FHBs into the market – alongside their access to KiwiSaver.

As noted, movers are a touch behind FHBs, accounting for 24% in purchases in Q1 2019. However, that’s a fairly normal share for movers, so the ability of FHBs to get into the market has come at the expense of mortgaged multiple property owners (investors).

Indeed, mortgaged investors accounted for just 22% of purchases in Q1 2019, comfortably below past norms. The flat market and only limited confidence about much near-term scope for renewed capital gains has seemingly kept new purchases by investors low in recent quarters.

Movers remain the biggest buyer group in both Selwyn and Waimakariri, but first home buyers have been starting to play a more important role in both areas in the last few quarters (especially in Selwyn).

Buyer Demand – Christchurch (volume index)

Buyer Classification – Christchurch (% of sales)

2006 2008 2010 2012 2014 2016 2018

0%

10%

20%

30%

40%

4%4%

6%

24%

22%

8%

15%

5%

24%23%

28%

2%

34%

First Home BuyerMoverNew to MarketMultiple Property Owner CashMultiple Property Owner MortgageReEntryOther



There are just some tentative signs that the market around Greater Christchurch may be perking up, albeit nothing strong yet. Within the city itself, most areas have seen prices rise over the past year (South West is the only exception), headlined by a 2.6% gain in Banks Peninsula and 1.8% in Christchurch Hills. Selwyn has seen values drop slightly since the end of 2018, but they’ve ticked up by 0.6% over the longer 12-month horizon. Waimakariri has seen an increase of 1.9% since March last year.

Greater Christchurch ValuesAverage value of housing stock – Christchurch ($)

Annual and quarterly change in value – Christchurch (%)

March 2019

Current Value 3 months 12 months Since peak

Banks Peninsula $516,466 1.8% 2.0% 8%

Christchurch Central & North $583,746 0.4% 0.0% 32%

Christchurch East $372,273 0.3% 0.0% 20%

Christchurch Hills $669,350 0.1% 1.0% 21%

Christchurch Southwest $471,922 -0.4% -1.0% 39%

Selwyn $553,369 -0.4% 0.6% 48%

Waimakariri $447,897 0.0% 1.9% 40%




Dunedin Market Activity

After rising to 28% of purchases in Dunedin in Q4 2018 (and coming very close to being the largest individual buyer group), first home buyers held on to that ground in Q1 2019, ticking up to 29%. Some key public expenditure in the city, such as the hospital redevelopment, will be attracting new people and hence new buyers. Meanwhile, with movers’ share of purchases in Dunedin edging lower to 26% in Q1 2019, FHBs have finally reached the top in terms of buyer categories.

The share of purchases going to mortgaged multiple property owners was 24% in Q1 2019, up from 19% a year ago. However, even at 24%, the MPO share is still below where it’s typically been in the past, suggesting that concerns about new government measures (such as the need to provide extra insulation) for rental properties could be weighing on investor demand a bit.

Buyer Demand – Dunedin (volume index)

Buyer Classification – Dunedin (% of sales)

2006 2008 2010 2012 2014 2016 2018

0.0%

10.0%

20.0%

30.0%

2%

5%4%5%

29%29%

24%

10%

29%

26%

6%

20%

8%

MoverMultiple Property Owner CashMultiple Property Owner MortgageFirst Home BuyerNew to MarketReEntryOther



The growth in Dunedin’s property values is pretty broad-based across the city. Values have continued to rise consistently in the first three months of 2019, from 2.4% in Peninsula& Coastal, up to 4.2% in Dunedin South.

That’s left values up by at least 12% over the past year in each of the main areas of Dunedin, with Dunedin South topping the ladder at a 15% gain.

Dunedin ValuesAverage value of stock – Dunedin ($)

Annual and quarterly change in value – Dunedin (%)

March 2019

Current Value 3 months 12 months Since peak

Dunedin Central & North $466,662 3.4% 13.0% 55%

Dunedin South $432,127 4.2% 15.0% 51%

Peninsula and Coastal $412,228 2.4% 12.0% 52%

Taieri $467,822 4.0% 12.0% 59%




CoreLogic Data and AnalyticsSuburb ScorecardDetailed housing market indicators down to the suburb level, with data in time series or snapshot and segmented in most cases across houses, flats and apartments. The Suburb Scorecard data includes key housing market metrics such as median prices, median values, transaction volumes, rental statistics and vendor metrics such as median selling time.

Market Share ReportsCoreLogic is in a unique position to monitor mortgage related housing market activity. Transaction volumes, dwelling values and mortgage related valuation events all comprise our Mortgage market report which provides an invaluable tool for mortgage industry benchmarking and strategy.

CoreLogic IndicesThe suite of CoreLogic Indices range from simple market measurements such as median prices through to our flagship house price indices – both quarterly for completeness and monthly for reactiveness. The Quarterly CoreLogic House Price Index has been specifically designed to track the value of a portfolio of properties over time and is relied upon by New Zealand regulators and industry as the most accurate measurement of housing market performance.

Sales VolumesCoreLogic tracks sales from a number of different sources to provide up to date insights on recent sale. Where applicable CoreLogic also applies estimation for expected final sales in recent months where not all sales have been collected.

Market ActivityBased on all valuations run through the centrally managed valuation panel CoreLogic provides an index for market activity which tracks as a lead indicator for sales in the market.

Buyer ClassificationA unique and flagship product to CoreLogic, Buyer Classification classifies all purchases into types of buyer based on their current ownership of NZ property. Used at a record level by Government organisations to assist policy decisions.

To view the latest report online and subscribe to receive it in your inbox on a monthly basis, visit;

www.corelogic.co.nz/property-market-and-economic-update-report

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Published date: Quarter 1, 2019



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