The slowdown in the Auckland market is now spreading to other parts of the country.

While 2015 and 2016 were boom times, there were hints that the was running out of steam late last year. And while there was a spike early this year, that too has fizzled.

According to CoreLogic, five of the six main centres have seen property values fall in at least two months, and while this is no surprise to keen market watchers, it is interesting to at last see the data coming through.

In Wellington, Hamilton and Tauranga, those falls have been consecutive in April and May. Is this a trend? Possibly.

The only star is Dunedin, which sailed on unaffected, bucking the trend of the current calm smothering the rest of the country. Dunedin has seen its property values rise by 4.5 per cent since December.

CorelLogic has some ideas as to why the market has cooled. People are asking too much for their property, people’s wages will only stretch so far when it comes to getting a loan, and the banks are being cautious.

But talk of a crash is just that - talk. The figures and economic factors at play indicate no sudden drop in prices. While Wellington has seen prices dip by 1.3 per cent, the other falls seen around the main centres have been small at around half of one percent.

CoreLogic senior research analysts Kelvin Davidson says: “The labour market [is] strong, and mortgage rates [are] unlikely to rise to any meaningful degree for at least another 12-18 months, nobody’s predicting that the patchy slowdown across the country will transform into a widespread slump.

New Zealand has suffered three main downturns since 1990.

These occurred in 1990-92, 1998-2000, and 2008-10. Even post GFC, property prices in New Zealand only dropped 10 per cent. And that was made up again by 2016.

“A 10 per cent drop over the next 12-18 months (as was seen around the GFC) would push down average values by close to $68,000, from around $678,000 to $610,000," says Davidson.

“That’s clearly a lot of money, but it’s also worth pointing out that there’s not actually a real loss until a property is sold. In addition, it would only return values to where they were as recently as August 2016. In other words, recent entrants to the housing market would be most vulnerable, particularly if unemployment started to rise significantly and/or mortgage rates increased sharply.

“For now, however, those are only risks, not a central forecast. And even if they did come true, the short analysis of history suggests that it might take a very major upset (e.g. another GFC) for values to fall by any more than 4-5 per cent on average across the country.”

Source: Oneroof Steve Hart

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