Late last year, rule changes announced by the Government and Reserve Bank were aimed at slowing down the rapid growth in Auckland property values. Coincidentally, at around the same time, the Chinese stock market dropped sharply and the Chinese Government imposed tight controls on money leaving China.
As a resultwe saw sales activity slow in Auckland in the last few months of 2015, down 10 per cent on the previous year. Chinese buyers, who had been very active, largely disappeared from open homes and the auction rooms from late August onwards.
Then, according to our stratified median, we also saw values across Auckland reach a peak in September or October then begin dropping.
Meanwhile, activity and values picked up in the areas surrounding Auckland.
We have been watching with interest to see what direction the market would take in early 2016.
One of the best and earliest measures we have of demand and activity in the market is based on the number of valuations carried out by banks on behalf of their customers. The number of these valuations carried out correlates very closely with the number of sales that will subsequently occur a short time later. So it is a great leading indicator of sales activity.
As markets around the country starting firing back into life again after the Christmas break, Auckland valuation activity was well down on pre-Christmas levels. It seemed as if the weak activity of late 2015 was set to continue.
Hamilton and Tauranga were also unusually weak after Christmas, suggesting some of the heat had also come out of those markets.
Then in the third week of February, activity shot up dramatically. After a string of short holiday weeks, it was possible that this was a one-week correction. But then in the last week of February valuation activity again remained very strong, and both weeks were at near record levels.
This was evidence to back up the anecdotes we are hearing that the Auckland market has suddenly kicked back into life, and that there are more Chinese buyers attending open homes.
This increase in valuation activity will lead to an increase in sales, and historically, when sales activity increases so do values.
It remains our view that the shortage of housing, coupled with high demand from record net migration (mostly from Kiwis either not leaving for Australia or returning home) and low interest rates will prevent the Auckland market from dropping too far and for too long. It may have already turned around.
