I see both QV and Core Logic came out with statements last week to say that the property market was up or down in December. This information is of very little immediate value; investors, buyers and sellers want details about trend direction and why.
Purchase Prices for Homes
Property Market
The following two charts give you useful detail from QV public data.
I use Household Income data from Stats to normalise prices to show the number of years of Household Incomes required to pay for an average Home. Excluding bubbles, prices nearly always rise but so do incomes. Bigger cities have bigger prices for more homes so the “natural” average is higher. BTW, median would be more representative, but is not published so I use “average”. I use QV data which unfortunately does not equate to regions, but the major cities in each region will dominate the averages for both prices and incomes.
OK the above is the raw data and you can see that to create click bait you could use just some regions or NZ as a whole, but that misses the most important data. How significant is any increase?
What if we normalise prices by dividing them by regional Household Incomes? ie affordability of properties by region.
Note: I forecast HH Income for each month after June in 2023. Monthly HH Income since June 2023 is forecast using the average monthly growth for 2022-2023 in each region. I think the changes will be small so far for the June 2023-24 year.
As you can see, Auckland is slightly below flat, but maybe it has overshot the bubble burst. Most regions are flat and as we should expect, incomes are back into driving house prices. However, for some regions such as Wellington and Christchurch, prices are at new ratios from prior to the pandemic bubble but have actually trended to the same value of about 6.7 times incomes. Is 6.7 the new normal?
Regions changed before & after the bubble because supply and demand in each region is different. My assumptions (informed guesses) for major centres are:
Auckland was oversupplied in rentals for a few years which may have represented an oversupply of houses, but that changed with migration. Selling prices may soon rise faster than Household Incomes to return to the long term average.
Tauranga became very short of supply when Auckland retirees decided to move out to recover equity. Strong internal migration continues as Auckland prices remain elevated, providing strong incentives for moving. The shortage is also impacting rents. Tauranga has increased from 8.4 times which was already high, to 9.7 times, higher than any other region.
Wellington has become oversupplied because of an apartment building boom so its ratio is well down from about 8 times to 6.7 times.
Christchurch has become undersupplied after many builders left the region due to the over-build after the earthquake. The ratio has risen from around 5.5 to over 6.5.
Hamilton I cannot guess, but the change is very small so maybe its just returned to normal.
However, if you have an explanation on one or more regions, don’t be shy, please drop it into the comments, maybe I can find the data.