The past six months has been characterised by stable conditions modest price increase, steady demand and a good but modest number of sales, all following a typical seasonal pattern. According to Quotable Value the increase in values in the Wellington Region, for the twelve month to October 2013 is 2.4% that is well below the national trend of 8.9%. This is attributed to slower economic conditions in the Capital, Government restructuring and employment uncertainty affecting property decisions.
The graph shows the trend for the four Wellington Cities (Porirua, Hutt, Upper Hutt and Wellington). Two obvious features are the extent to which Wellington is behind the national trend and the declining trend for Wellington in recent months, whereas the national trend continues to increase.
Other statistics for the past few months are noticeably normal, following seasonal trends for; the number of sales (but lower than the long term trend), time to sell, number of listings and value increases. The value increases were stronger in the June but have now eased back (this can be seen on the graph with a peak at 3% in August.
The statistical exceptions are that asking prices are sharply up, and the stock of listings is noticeably down for this time of year. This will cause upward price pressure but is no expected to be significantly.
The affect of the Reserve Banks new lending requirements for high loan to equity ratio loans has not really shown up in statistical trends to date, but anecdotally in does appear that it has subdued the market, reducing buyer interest. It has certainly reduced the volume of valuation work that is a requirement for his type of lending.
Our outlook is for steady, gradual price and value increase in the short term, particularly with the Reserve Bank’s new requirements taking effect and the prospect of interest rate increases in the medium term. However, there remains a shortage of new buildings being constructed to meet the number of homes required, and this will cause price pressure in the longer term, but not to the same extent as Auckland of Christchurch.
Replacement Insurance has dominated our work for the last 3 months, making us very aware of the new insurance environment and more interestingly trends in the homes we are valuing.
Replacement assessments are taking much longer that we had initially expected. The information insurers are looking for means we have to record more about the property than we have had to for a market value and it has made us recognise how much owners invest in their land apart from the main building.
In the cases we dealt with so far, the standard calculations and on line tools were not going to be adequate. The most common reasons for this are the quality of the building, the materials used, post construction improvements and upgrades, and extensive development of the site. A project to improve the section each year soon adds up and can include; decks, patios, retaining walls, pergolas, drives, garaging, paths, raised gardens, fencing, studios and sheds. These can easily add 30% to the replacement cost assessment.