Residential property values continued to decline across the country in December, with values 0.9% below the same time last year, according to the latest QV Residential Property Market update.
QV said that looking back over 2010, values increased in the first few months of the year continuing the trend from mid 2009. However, from April 2010 onwards values in most cities and regions began to decrease and by the end of December had fallen 1.9% compared to March.
Last year was also particularly subdued in the property investment sector, largely due to tax changes to investment property announced in the May Budget.
According to QV research director Jonno Ingerson, "low sales volumes were the most notable feature of the residential property market throughout 2010."
"The year started with sales numbers similar to 2009, but from March 2010 onwards they began to drop. Between June and September volumes were at the same level as 2008 during the recession, 28% below 2009, 27% below the long term average and 57% below the peak of 2003."
"The number of sales in October 2010 dropped to the lowest level for that month since 1985, and while there was a very mild recovery in November, it was still well below average. Early indications are that the number of sales will also be low in December. If that is the case then the total number of sales for the year will be about the same as 2008 and the lowest since 1991," Ingerson said.
He cited a number of factors for the low number of sales in 2010 including the general lack of consumer confidence, banks tightened lending criteria, consumers opting to reduce debt rather than buy or sell property and sellers reluctance to realise potential losses selling in a depressed market.
Ingerson said Government tax changes also impacted the market.
"Many property buying and selling decisions were deferred early in 2010, when the Government indicated that it was likely to introduce a range of tax changes, including a decrease in income tax and change to the treatment of tax for investment properties. While the changes to tax on investment properties announced in the May Budget were not as drastic as some expected, the investment sector of the market in particular remained very quiet," Ingerson said.
The QV update also revealed significant differences between the main urban, provincial and rural areas throughout 2010.
Values of residential properties across all rural areas remained relatively flat until May before steadily dropping for the rest of the year. By the end of the year values were 2.5% below the same time last year.
Across all provincial areas values rose until March before falling until June, stabilising for a few months, then dropping steadily in the last three months of the year. Values ended the year 2.3% below the same time last year.
The main urban areas saw values rise through until April before starting to decline. This rate of decline slowed towards the end of the year, and values ended the year 1.1% below the same time last year.
There were also differences between the Auckland and Wellington areas throughout the year.
In Auckland values rose by over 1.5% between January and March, before sliding back until July. The decline slowed through the second half of the year with the last few months being relatively stable. Values in the Auckland area ended the year 0.6% above the same time last year.
In the capital values increased by just over 1% through until April before rapidly dropping away until October when they flattened, then rose slightly from November to December. Values ended the year 2.2% below the same time last year.
Looking to the new year Ingerson said without wider economic changes there is unlikely to be dramatic changes in the property market.
"Consumer confidence is a key driver of the property market, and that will need to improve before the market returns to some form of normality."
Ingerson said the latest QV survey suggested some confidence may be returning, with more people expecting to see house prices rise in 2011 than fall.
"Despite the majority of people believing that now is a good time to buy but a bad time to sell, there are now more people intending to buy and more intending to sell in the next twelve months than was the case in 2010," Ingerson said.
Reduced building activity and demographic changes also point to potential price rises.
"At some stage in the next year or two, the lack of building activity over the last couple of years, combined with a steadily increasing population, is likely to lead to increased demand for housing and therefore a stabilisation and subsequent increase in values. This will most likely be seen first in the main centres, while some of the provincial and rural areas will continue to struggle as economic conditions remain difficult for both businesses and consumers."