New data shows link between elections and property sales
Property Institute of New Zealand Chief Executive Ashley Church is pointing to new property market data as proof of a suspected link between New Zealand elections and a ‘cooling’ of the property market.
Mr Church says that there has long been a view that the uncertainty surrounding elections cools markets and he refers to a recent report prepared by Property Market Data company Valocity which shows a big dip in property sales in the months leading up to the elections in 2011 and 2014.
“Between the announcement of the date of the election in March 2014, and the election in September of that year, there was an average drop in sales of 23% per month in Auckland – followed by an immediate recovery to previous levels, post-election”.
“The drop in sales leading up to the 2011 election is less dramatic – but it should be remembered that this was during a generally flat period of property activity whereas, in 2014, we were in the middle of a property boom”.
Mr Church says that data from a new ‘Property Institute Valocity Regional Insights Report’ appears to confirm the same trend in the lead up to this years’ September election.
“In the 12 months between July 2016 and July 2017 sales volumes across the country are down by 55.4% (4229 properties) – but the majority of that drop has taken place since the election date was announced in February of this year”.
Mr Church says that, while other factors may also be affecting the property market, the impact of the election is clearly having an effect.
“I don’t think there’s much doubt that the Reserve Bank Loan-to-Value restrictions coupled with mortgage rationing, by the banks, has also had an impact on the market – but an analysis of recent mortgage lending suggests that those influences aren’t as strong as we initially thought”.
Mr Church notes that, according Valocity data, first home buyers are consistently accounting for just under 30% of all new mortgages across the country – a figure that has changed little over the past few months. He also notes that mortgages to Investors have remained steady at about 18% of all new mortgages for several months.
“Interestingly, refinancing accounts for around 20% of mortgages nationwide – which may be an indication that people are locking in longer term rates in anticipation of an increase in mortgage interest rates over the next couple of years”.
Mr Church also notes that in 2011, and particularly in 2014, the market took off again after the elections in those years.
“Whether that will happen this time is far from certain – but the fact that there is a massive shortage of homes, in Auckland, continues to make some commentators nervous about declaring this current boom ‘over’ and there may still be a little energy left in the market”.
OTHER HEADLINE RESULTS FROM THE REPORT
• Median sales volumes, across the country, have dropped dramatically:
o Apartments: 1297, per month, in the 3 months between Feb and April 2017 vs 692, per month, in the 3 months between May and July 2017
o Dwellings (houses): 6426, per month, in the 3 months between Feb and April 2017 vs 3297, per month, in the 3 months between May and July 2017
o Lifestyle properties: 583, per month, in the 3 months between Feb and April 2017 vs 258, per month, in the 3 months between May and July 2017
o Auckland has been hit hardest by the drop in sales volumes – which are down, in that region, by 64.2% (946) over the previous year.
• However, the rolling 3 month median of sales prices across the country has remained largely unchanged over the past 12 months ($489k in the 3 months between August and October 2016 and $480k in the 3 months between May and July 2017).
• The median sales price, in Auckland, is $840k to July 2017 – almost unchanged from 12 months previously ($849). At $840k the median house value in Auckland is also 46.5% above the median CV value.
• In Wellington – the median sales price is $533k as at July 2017 – up 7% on 12 months earlier. First home buyers in Wellington accounted for 34.7% of all new mortgages to July 2017 – the highest for FHBs in the country. Investors only accounted for 14.9% of new mortgages – the lowest in the country.
• Property Investors in Hamilton account for 30% of all new mortgages on our July rolling median – the highest in the country.
• Sales volumes across all property types are down in Christchurch – despite that city already being at lower sale levels than most of the rest of New Zealand.
o Apartments: 128, per month, in the 3 months between Feb and April 2017 vs 79, per month, in the 3 months between May and July 2017
o Dwellings (houses): 347, per month, in the 3 months between Feb and April 2017 vs 305, per month, in the 3 months between May and July 2017
o Lifestyle properties: 6, per month, in the 3 months between Feb and April 2017 vs 4, per month, in the 3 months between May and July 2017