Residential market uplift on the horizon in Christchurch

The Christchurch residential property market looks to be on the cusp of an uplift in the current market cycle, according to CBRE valuers.

Victoria Murdoch, Senior Director of residential valuation at CBRE, formerly TelferYoung, said several indicators show the market may be about to climb out of the trough. These include interest rates potentially peaking, the easing of loan-to-value restrictions, agents reporting more buyer activity and the New Zealand economy entering a recession.

“We believe interest rates are likely to be at their peak and market expectations are now for the Reserve Bank to begin easing monetary policy,” said Murdoch, who oversees the CBRE/TelferYoung residential valuation teams across the South Island and lower North Island.

With the Reserve Bank also easing loan-to-value limits, the accessibility and affordability of bank lending is now improving for many home buyers, especially first home purchasers, she said.

“The outlook for interest rates and LVR changes are all going to help those buyers who have faced challenges with affordability. Reports from agents are that there is also now more buyer interest in properties on the market, with better attendance at open homes and increased levels of enquiry.”

This is expected to encourage more sellers to place properties on the market, especially as the traditionally more active springtime and pre-Christmas sales period approaches – although the usual lull around the upcoming election is also a likelihood.

“The next signs we would expect to see are auction clearance rates increasing and the ‘days to sell’ rate reducing as demand picks up and properties spend less time on the market. Once political certainty re-emerges following the election, we would expect to see those drivers really kicking into action.”

Another localised factor which lends a positive outlook to Christchurch residential property is the fact that our market was less severely affected by the recent downturn, compared with other main centres in New Zealand.

As at May 2023, the median price for residential property in Christchurch had declined by 8% compared with the previous year, according to REINZ data. In contrast, Auckland and Wellington, which both experienced higher value growth prior to the downturn, saw larger year-on-year declines of 13% and 15% respectively.

While high interest rates and inflation have created extremely challenging situations for many mortgage holders in the lower to mid value ranges, some notable high value sales have been transacted in Christchurch recently, demonstrating that high-end properties with unique and difficult-to-replicate features do not follow normal market trends.

A 357sqm, four-bedroom home with a pool at 26 Shrewsbury Street, Merivale, sold at auction in March this year for $3.925m. The property, a villa which had been significantly modernised and extended under architectural guidance, attracted multiple bidders and sold well above the vendor’s expectations. 

In Fendalton, an architect-designed, 503sqm home at 1B Wood Lane, built in 2020, also sold in March for $4.1m, which was $1m higher than its previous sale price three years earlier. Again, the property offered several unique features including a site bordering the Ōtākaro Avon River and near-new construction, said Murdoch.

“Sales like these would appear to buck the trend of the point we are at in the market cycle. However they show there is always a buyer pool for high-end, architectural properties with unique attributes.

“A further consideration for buyers in this sector of the market is the cost and time to replicate. People will pay a premium to secure a newly built or renovated home that is available now, rather than facing a long process of potentially years to find a suitable site, design a home and build it, with construction costs at high levels.”