Napier

This graph is often used to get a sense of whether property prices look “cheap” or “expensive” within the region.

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Is Napier City over or undervalued?

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Napier City over/undervalued

Data type: Property cycle analysis Source: REINZ House Price Index
Got a question or comment about this data?
Put your questions and thoughts in the comments section (below).

What does the graph show?

This graph shows the region’s property price compared to where we’d ‘expect’ it to be.
When the line is below 0%, e.g., -5%, then property prices in the region are ‘undervalued’. 
Property prices are less expensive than what we might expect them to be.
This means it could be a good time to buy.
When the line is above 0%, e.g. 7%, then property prices in the region are ‘overvalued’.
Property prices are more expensive than what we might expect them to be.
This means there might be better property options in other regions.

How do I use the graph?

This graph is often used to get a sense of whether property prices look “cheap” or “expensive” within a region.
When the area is overvalued, it looks a bit more expensive than we’d expect it to be.
When the area is undervalued, it looks a bit cheaper than we’d expect it to be.
You can then use this information to understand which areas might achieve faster capital growth over the medium term.
For instance, an under-valued region (where the property market is relatively cold) might go up in value quickly over the next 5 years. 
Whereas an over-valued region (where the property market is hot) might go up in value more slowly over those 5 years.
It’s not a perfect model and won’t tell you where property prices will go tomorrow. But it can give you a sense of where the opportunities might be. Assuming nothing has structurally changed within the property market.

What makes the line go up and down?

The line goes up and down based on how quickly house prices are increasing compared to the rest of the country.
When the line goes up, property prices in the region are increasing faster than the whole of New Zealand.
When the line goes down, property prices in the region are increasing more slowly (or going down faster) than the rest of the country.
If the line is flat, then property prices in the region are increasing (or decreasing) at the same rate as the rest of the country.

What does undervalued mean?

An area is undervalued if property prices in the region are lower than what we’d expect them to be. 
Let’s say Auckland property prices are usually 1.5x New Zealand property prices.
Now, let’s say Auckland property prices are actually 1.2x New Zealand property prices (in a specific month).
In that case, Auckland property prices are undervalued by 20% at that point in time.
If this was the case, it suggests that there may be a buying opportunity within the region. At least compared to the rest of the country.

What does overvalued mean?

An area is overvalued if property prices in the region are higher than what we’d expect them to be. 
For instance, let’s say Auckland property prices are usually 1.5x New Zealand property prices.
Now, let’s say Auckland property prices are actually 1.8x New Zealand property prices (in a specific month).
In that case, Auckland property prices are overvalued by 20% at that point in time. 
If this was the case, it suggests a buying opportunity may exist in other regions outside of Auckland.

Where does the data come from?

The calculations are based on the REINZ House Price Index. This is the most reliable data source about how house prices change from month to month.
The Real Estate Institute of New Zealand (REINZ) collects data directly from agents.

How is the data calculated?

For proper data nerds, knowing how the data is calculated can be helpful.
<ol><li>Each region's property prices are compared to New Zealand's property prices. For example, in May 2020, Invercargill’s property prices might be 60% of New Zealand’s (for the specific month). This is completed hundreds of times with all the data available.</li><li>We then average those ratios to calculate an average. This lets us know, “on average, how expensive is each region compared to the rest of New Zealand?” For example, over the long term, Invercargill’s property prices might be 50% of New Zealand’s. </li><li>We then look at where each region is on a specific month compared to that average. </li></ol>
Let’s continue with the example of Invercargill. Under this scenario, property prices in the city are “usually” 50% of New Zealand’s prices.
But on May 2020, Invercargill house prices were 60% of New Zealand’s prices (in this example only).
That means that in May 2020, Invercargill house prices were 20% overvalued.

Can I download the data?

No. This data is an essential part of Opes Partners’ intellectual property. Although we are happy to make this available publicly (for free), we don’t allow people to download the data directly.

Can I reference the data in my article or research project?

Yes, you can reference the data if you are writing a report, article, or research project. The only requirement is that you mention that the data has been sourced from Opes Partners.
That way, if people want to check the updated data, they know where to find it.

Is Napier City over or undervalued?

Is Napier City over or undervalued?

What does the graph show?

How do I use the graph?

What makes the line go up and down?

What does undervalued mean?

What does overvalued mean?

Where does the data come from?

How is the data calculated?

Can I download the data?

Can I reference the data in my article or research project?

Ed McKnight

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