House prices fall below CV

Stuff ?reports: quote:

Properties in about 50 parts of Auckland are now worth less than their CVs, new data from?

The city’s properties were revalued last year but now suburbs including Mangere Bridge, Dannemora, Epsom, Half Moon Bay, New Lynn, Remuera and Te Atatu South all have Median Homes Estimates ? a value based on the current sales price of others in the area???of less than their CV.

St Johns had the lowest?price-to-CV ratio, with a median value of 94 per cent of median CV. chief data scientist Tom Lintern said the concept of relying on a CV as a price guide was becoming less?relevant. end quote.

Using the CV as a price guide has been redundant for years. They were way too low over recent years while house prices went through the roof. Now that they have been revised, they are too high. It is exactly the same pattern that happens every few years. quote:

While buyers were used to putting a multiplier on CVs to assess a potential price, that was no longer an accurate indication. end quote.

It was never accurate anyway. I found that people seemed to rely more on the Homes website than the current CV. quote:

“Approximately 50 Auckland suburbs are valued less than their current CVs, highlighting how the capital valuation for a property can become out-of-date,” he said.

Christchurch was in a similar situation ? Avonside, Upper Riccarton, Dallington and Avonhead were among the suburbs with properties worth less than CV, as a median value.

Lintern said while other main centres were still selling above CV,? new valuations were due in Wellington, Hamilton and Tauranga. end quote.

We have seen a definite levelling off of house prices in Wellington as well. What goes up must always come down, at least to some extent. House prices could not keep increasing at the rate that they were. Eventually, nobody would ever be able to afford to buy a house if that were the case. quote:

Lintern?said Auckland’s?flat price did not tell the full story. Lynfield values were down more than 5 per cent year on-year, St Johns down 3.9 per cent and Burswood down 3.8 per cent. end quote.

This is a market adjustment, pure and simple. Nothing to panic about. There is still a good market for sellers, and the demand is going to be there at least until Phil Twyford builds his 100,000 houses. At the rate he is going, well, let’s just say that may be a while.

Christchurch is a bit of a special case, of course. Dunedin is currently the fastest growing area for house prices. A lot of regional towns are doing well at present, and it is really only Auckland that is seeing some levelling of prices, mainly because they have probably gone as far as they can, for now at least.

The ones who may feel some pain with this are first time buyers and also investors. First-time buyers, who bought with a low deposit may find themselves falling outside their banking criteria, but this should not present a problem, so long as they keep paying the mortgage. Investors have a slightly bigger problem though, because the banking requirement is for them to have borrowings at no more than 60% of the value of their overall property portfolio, and banks are much less forgiving towards investors. During the GFC, banks would force investors to sell properties once they fell below the banking criteria, and there is nothing to suggest that might not happen again.

For the moment, there is no need to panic. A market correction is not a bad thing, and so long as you do not have to sell,?everything will be fine.?First-time buyers may feel the jitters at their house now being worth less than they paid for it, but we’ve all been there. The only possible cloud I see on the horizon here is for investors. It is quite possible that having been beaten with a big stick by the government, the banks may come in from left field and start blindsiding them as well.