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.
We recognise that property prices are just one piece of the economy and the impacts of a COVID-19 related recession will reach far beyond the property market. For those who’s jobs and livelihoods are impacted, any property price decrease will be painfully felt, but for others, this analysis provides a reminder of the good times New Zealanders have experienced in the property market.
How are you affected? Check out the capital gains seen in your neighbourhood below
Monthly HomesEstimate Property Update
The homes.co.nz Monthly Property Update is generated using homes.co.nz’s May 2020 HomesEstimates, providing an up-to-date perspective on house values around New Zealand.
NZ’s First Home Buyer HomesEstimate
The “First Home Buyer HomesEstimate” is homes.co.nz’s estimate of what a typical first home may cost. It is calculated to be the lower quartile HomesEstimate in a town.
How do we calculate these figures?
The homes.co.nz Monthly Property Update is generated using homes.co.nz’s monthly HomesEstimates and provides an up-to-date perspective on house values around New Zealand. By valuing the entire housing stock, the homes.co.nz Monthly Property Update can compare median values from month to month in a consistent and reliable way. Our HomesEstimates are calculated for almost every home in New Zealand by an algorithm that identifies the relationships between sales prices and the features of a property.
Established in 2013, homes.co.nz is NZ’s first free property information portal eager to share free property information to New Zealanders.