Private property issue #92 - New house price data

New house price data came out at 9am this morning.

The numbers show that property prices are bouncing back.

They’re up 3.8% compared to the bottom of the market.

But prices did take a slight fall of 1.1% in December.

Some of that December decrease is expected. Property prices usually fall at the end of the year. But they fell slightly more (0.4%) than usual.

I’m not worried about that.

You should always expect some ups and downs in the property market. That small decrease puts property prices back where they were in October.

But here’s something interesting. Property prices were hotter before the election compared to after.

Property prices increased 2.5% in the 3 months before the election.

They only increased 0.9% in the 3 months after.

So, the recent house price increases are down to the market naturally bouncing back. They’re not going up because of Nationals’ proposed changes. At least, not yet.

The new government’s tax changes will boost the property market … but that boost is still to come.

If you’re a true property market data nerd, you would've also been a pig in mud this week. All three data companies (REINZ, QV and CoreLogic) released new numbers.

But they all said different things.

• REINZ said property prices fell 1.1%
• CoreLogic said they increased 1%
• And QV said they went up 0.6%

I won’t bore you with the details about how they calculate their numbers.

But, with so much data coming out … it’s easy to get lost in the detail. If you focus too much on what happened last month, you can miss the real trends.

And the trend is that property prices are bouncing back in every region in New Zealand.

For example:

• Wellington property prices bottomed out in May 2023 and have since gone up 7.1%. (7.1% in just 7 months is fast!)
• Auckland property prices bottomed out in the same month and have since gone up 4.2%. On a million-dollar property, that’s $42,000 up

Here is the data for every region. Click on the image to explore the data in your area:

At that rate, property prices could easily increase 7-8% this year. That is in line with some of the main banks' forecasts.

Westpac thinks property prices will go up 8% this year. ASB says 7.3%.

However, some banks are more conservative. ANZ says prices may only go up 4% in 2024.

Who will be right? It depends on interest rates. Right now, they are high. But many commentators expect them to come down a bit.

Earlier this week, Kiwibank and TSB both decreased their 2 and 3-year interest rates.

And in the last business days of 2023, ANZ, BNZ and ASB also reduced their rates.

These changes are nothing to write home about. They’re all small 0.1 – 0.2% decreases. But they set the scene for what could come throughout the year.

Most of this will be welcome news to investors who have endured 2 years of doom and gloom. So, if you’re mulling over an investment this year, where are the hot spots to buy?

Let’s look at my over and undervalued model. It looks like the three big cities are at the right point in their property cycles.

Auckland, Christchurch, and Wellington City could be the best places to invest.

Auckland looks 9.3% undervalued, Christchurch 9.26%, And Wellington City 11.9%.

Regional property prices boomed from 2016 – 2021. They outpaced the larger cities. Now it’s the big cities turn.

Just be careful with Wellington City. It’s still on the downward leg of this cycle.