Over the past couple of months, we at CoreLogic have developed a new measure for assessing the relative risk of a more serious property downturn in each part of the country, based on individual components such as affordability, investor activity, credit behaviour, listings vs active demand, and economic structure & activity. It utilises our own data, as well as figures from Trade Me Property and Centrix.
View the commentary and analysis here.
It’s important to note that we’re not saying there’ll necessarily be a more serious property downturn; just that with a slowdown occurring (e.g. due to rising mortgage rates), it’s worth being awake to potential risks. It’s not a case of panic either – as always, it’s about being informed.
So what about some case studies? Taking Auckland, for example, it ranks a little worse than the average for all areas, but not too bad (e.g. it looks more stable than areas such as Otorohanga, Kawerau, and Clutha). However, it does look more vulnerable than each of the other main centres, predominantly due to a high recent level of investor activity and its greater reliance on the currently-absent international tourism market. If some of those recent investors start to find things too tough to manage with yields low and costs rising (e.g. if mortgage rates rise more sharply than they anticipated), some additional selling activity would tend to dampen the wider market.
Meanwhile, Hamilton is on the other side of ‘mid range’, or in other words, it looks safer than average, and Tauranga actually finds itself in the least vulnerable bucket. In Hamilton, a sturdy and diverse economy is a positive factor, while credit indicators look respectable (e.g. mortgage arrears are low), and the listings vs active...
