It’s not possible to write a summation of
the Canterbury property market without reference to the significant impact of
the earthquake of 2010 and 2011
Not surprisingly the impact of these events and especially the Feb 2011 quake have continued to have an ongoing impact on the market across the region but especially in Christchurch itself.
Seen from the perspective of property sales, the two immediately affected months of September 2010 and February 2011 (shown in the red bars in the chart below) saw a significant decline in sales. The following months also witnessed impacted reduction in sales. The best measure of this is shown by the thin red line which represents the share of national property sales as represented by Canterbury each month as measured by the right hand axis.
The share dropped massively by around five percentage points in each of those months, however what is interesting is to the extent that by August of last year sales in Canterbury were back to the normal level of representing around 13% of the national total.
What is quite interesting is the most recent 3 months when sales have fallen off and have begun to represent less than 12% of the national sales level. This could be a function of the strength of the Auckland market diluting the regional sales or it could be a function of lower activity as the sheer scale of the property market has been significantly adjusted by the after effects of the earthquake and net outbound migration.
Turning to property prices, for this analysis I have used the REINZ Stratified median house priced data for just Christchurch city rather than for the whole of the Canterbury region.
The picture here is of strong property price growth over the past 12 months as prices have risen over 9% in this time. The current stratified price at $368,140 in September fell from the August level of $379,534, that level was a new peak in selling price taking the level to 4.7% above the peak of October 2007.
As can be seen from the chart the property market decline from late 2007 resulted in a 14.6% decline in prices in the 15 months from October 2007 to January 2011, from that point prices began to recover with no visible impact of the earthquake on property prices.
As I have done with other such reports I am interested to factor inflation impact into property prices. The chart below takes the past 5 years and adjust all property prices to the equivalent of todays $ value adjusted for inflation. The picture as ever changes the story somewhat.
Allowing for the impact of inflation property prices in Christchurch have not recovered from the peak of the market in 2007. Prices remain just under 10% below the October 2007 level adjusted for inflation. The overall fall in property prices was of the order of 18.5% decline, and it is only since April of last year that prices have begun to recover.
Taking the picture back to the past 20 years the property price appreciation in Christchurch can be seen in the chart below.
Prices rocketed from $204,308 in June 2002 to more than double that level (inflation adjusted) by the peak in October 2007 at $406,867.
Property supply / demand balance
The supply side and the demand side of the property market in Canterbury are key indicators to assessing the state of the market.
The supply side is best represented by the inventory of homes on the market, the October level of 22.8 weeks of equivalent sales as reported by Realestate.co.nz in the NZ Property Report shows a steady improvement of availability of property for sale based on the recent level of sales. This level though does continue to trend below the long term average of 31.1 weeks indicating that the property market continues to favour sellers.
The balance between new listings and sales is perfectly represented in the chart below which tracks the rate of increase / decline in sales and new listings based on a 3 month period (September data being the end of Q3 for 2012).
The recent quarter has seen, as commented early a significant slowing in the rate of sales growth at just 3% down from the 47% in Q2. At the same time listings fell by 7% both indicators of a slowing property market.
The property market in Canterbury in general has been experiencing turbulent times as has the general population and the economy over the past 2 years. There is a sense that the market is returning to a more stable level of activity, although it is clear that levels of activity are slowing. It could be hypothesised that the level of sales activity and consequential price rises over the past year were the direct result of the earthquake. People choosing or having to make decisions to move creating supply and demand factors; those factors may now be washed through the system leaving a quieter market which appears to be less impacted by the pressure from any shortage of listing. This easing of such pressure on the demand side may well result in prices leveling off from the recent rapid rises of the past 12 months.