Which are the best residential markets in New Zealand?

Industry shares 2022 forecasts

Which are the best residential markets in New Zealand?

The New Zealand housing market in 2021 was like a rollercoaster ride due to the impacts of the COVID-19 pandemic, regulatory changes, and other factors. So, before we dive into this year’s market, let’s find out which locations ended 2021 with a bang.

The latest Quotable Value (QV) Quartile Index has revealed how quickly first-home values rose across the country last year, with the most significant gains across the main centres over 11 months from January 01 to November 30, 2021, found in Papakura (41%), Christchurch (37.7%), Franklin (33.7%), Napier (30.2%), and New Plymouth (30%).

Outside of the NZ main centres, first-home values increased dramatically in Stratford (59.8%), Waitomo (57.2%), Wairoa (48%), South Taranaki (45.4%), and Kaipara (44.3%) — all districts boasting average home values well below the national average.

QV also noticed changes in trends last year, with Auckland being a prime example of a shift in price pressure as it climbed from the bottom of the property ladder to the top, having seen an increase in entry-level home values by an average rate of 5.9% in the November quarter, compared to 9.4% in the upper quartile.

The only main centre where the rate of first-home value growth did not plummet in the November 2021 quarter was Christchurch, which hit an annual high growth rate of 15.3%.

Read more: Trade Me shares changes in the property market over five years

QV spokesperson Simon Petersen described 2021 as an “absolutely bumper year” for New Zealand’s residential property market.

“We all thought 2020 was a big year, and yet values increased by less than half as much on average as they have this year,” Petersen said. “2021 has certainly been action-packed. We’ve seen the return of loan to value ratios, rapidly rising debt-to-income ratios, high inflation, low-but-rising interest rates, and a raft of significant tax changes designed to take some of the steam out of the market.”

Petersen does not expect to see significant drops next year. However, he noted that QV’s latest data indicates a substantial shift in momentum from the 25% of most affordable homes, those typically targeted by first-home buyers (FHBs) and investors in the lower quartile, to the 25% most expensive houses in the upper quartile.

“This spring swing from entry-level properties to the far more expensive homes at the top of the property ladder suggests that rising interest rates and affordability constraints are starting to bite first-home buyers, who will be finding things even more difficult right now. As a consequence, that section of the market is slowing, while people further up the ladder will still be able to use the sizeable gains they’ve made over the last year to trade their way up,” Petersen added.

“I’d expect to see this trend continue next year, with interest rates highly likely to rise further, making things even more difficult for first-home buyers in the foreseeable future.”

Meanwhile, the CoreLogic 2021 Best of the Best Report showed that CoreLogic economists expect a dramatic housing slowdown this year.

“Sales volumes have already turned a corner and are likely to be much quieter in 2022, with the pace of annual value growth set to continue to ease from a figure of more than 25% for calendar-2021 to perhaps single digits, even low single digits, in 2022,” said CoreLogic chief property economist Kelvin Davidson.