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The median price of a home in New Zealand increased by just 1.2 per cent over the least year, reaching $525,000. Real Estate Institute of New Zealand (REINZ) data shows that during the previous year prices rose far quicker, by 6.3 per cent.
This data begs the question - how are the major property markets in the North and South island faring as we approach the end of 2017? What's changed and why is the New Zealand market slowing down?
The median price of a home in New Zealand increased by just 1.2 per cent over the least year.
The end of Auckland's rise
The slowing rate of increase in the nation's median house price can be easily explained. It's a change driven by a deflating Auckland market, where homes are taking on average three days longer to sell than during the same month last year. Sales volumes were also down by almost a third during September 2017, compared to September 2016.
What's more surprising is the slow down in Auckland's median house price rises - in September this year they were at $845,000 - the same as they were in September 2016. When national house price increases are measured excluding Auckland, we can see the affect the city's slowdown is having on the country's average house price.
Excluding Auckland, the nation's median house prices grew by 5.7 per cent this year, compared to 9.6 per cent during the last.
Northern growth centres
Every northern region except Auckland experienced house price increases over the last year.
Auckland's high prices may be driving home buyers and investors out of the city towards more affordable pastures. This would partly explain the impressive growth we're seeing in other regions around the North Island.
Every northern region except Auckland experienced house price increases over the last year.
The Hawkes Bay was particularly impressive, seeing median price growth of over 18 per cent. Gisborne, Wellington and Northland also performed well, with increases of between 10 and 15 per cent.
When considered as a whole, the North Island property market appears to be in a state of change, thanks to uncertainty in the Auckland market. Despite that, investors willing to buy further afield can find strong rental yields and impressive value growth in areas such as Whangarei or Napier.
Christchurch's slowdown
Property values in Christchurch city have generally grown by between 1 and 6 per cent a year in the last five years. However, it appears the market here is slowing down in terms of price growth and volume of sales.
In fact, during the year to September the median price in Christchurch fell by 3.9 per cent and the volume of sales was down by 26.9 per cent. There's a chance, however, that this minor slowdown is due mainly to election uncertainty, and that sales will pick up again in the following months.
Elsewhere in the South Island, smaller regions are faring better with improving market fundamentals that hint at the possibility of strong future growth.
During the year to September the median price in Christchurch fell by 3.9 per cent.
Strong growth in the South Island's regions
While median prices fell on the West Coast and in throughout Canterbury, they increased in Otago, Nelson and Southland. Southland was the best performer overall, according to the REIV, seeing price increases of roughly 10 per cent over the year ending September. This was driven by a 19 per cent increase in Central Southland and a 12.3 per cent increase in Gore.
Otago on the other hand experienced a median price increase of 6 per cent. As usual this was driven by strong increases of 16 per cent and 17.9 per cent in Dunedin City and the Queenstown Lakes District, respectively.
These areas have long experienced impressive value gains, Queenstown in particular. For property investors willing to brave the cold, they both offer unique opportunities that could bolster and diversify any portfolio.
Comparing North and South
The markets of the North Island and South Island have several fundamental differences - the North has triple the population for one. However, there are similarities. The biggest cities in both islands are seeing stagnating house prices, and decreasing sales activity.
In both islands smaller regions are perhaps more promising as investment locations. Areas like Whangarei, Napier, Queenstown and Dunedin, are slightly more affordable and are experiencing better value growth. The North does, however, have the edge when it comes to consistent price growth in all of its regions.
Whether you're in the North Island or the South Island buying an investment property outside of your home city could be your best option. Do your research, find a local real estate agent to advise you'll find success no matter where you buy.
