The property market in Christchurch after the quakes

The major quake on February 22nd has caused much more extensive damage to Christchurch than the September 4th quake. It is too early to say exactly what impact this will have on the housing market in Christchurch, although what happened between September and February may give us something of a guide.

After the September quake, the number of house sales slowed dramatically for a few weeks, but then began to recover in subsequent months. New sales and those already in the pipeline in September were delayed for several weeks as potential buyers sought engineers’ reports to ensure the structural integrity of the house they were about to buy, and there were also delays in getting LIM reports due to damage to the Council storage facilities. While badly damaged properties were not selling, houses in less damaged areas were beginning to sell again, and in November sales numbers were nearly back up to pre-earthquake levels. December and January saw a typical seasonal slowdown in activity, and any sales underway in February prior to the quake will now take some time to come through.

In the months leading up to the September quake, house values in Christchurch were gradually declining, as they were across much of the country. Immediately after the earthquake house values began to increase, and by November had risen about 3% before levelling through to February. If we assume that values would have continued to decline if there had been no September earthquake, then house values in February were probably 5% higher than they would have been.

This jump in values was due to increased demand for houses in unaffected areas, both from people within Christchurch, and from people outside the region moving in to assist with the rebuild.

While the property market in less damaged areas was beginning to return to normal following the September quake, the February quake has clearly changed that. An assessment of how many properties have been badly affected has really only just begun and is likely to take some time to complete. The wider impact of the February quake also means that it is likely to take longer for the property market to get moving again.

Christchurch will clearly be going through a great deal of change in the coming months and possibly years. Decisions still need to be made on which areas need to rebuilt, and how and when that happens. There is likely to again be an increase in demand for houses in less affected areas both from people within and outside Christchurch. The people of Canterbury are also only just coming to terms with what has happened, and while for some people property decisions have become a matter of necessity, for others it may be the last thing on their minds. Some people are determined to stay in Christchurch – the place they call home; others have decided to leave permanently for the sake of themselves and their families. The housing market is heavily influenced by consumer sentiment, and it is almost impossible to predict how these various factors will influence the sentiment of the people of Canterbury and therefore what impact it will have on the property market.

The QV house price index is based on the last three months of sales data. For the next few months this sales data will be both slow to come through, and will mostly be from prior to the February quake. As a result we will suspend publication of the index for Christchurch, and possibly Selwyn and Waimakariri Districts if the sales volumes prove to be too low. We will provide regular updates of the housing market across Canterbury as soon as there is sufficient data to do so.

Posted: 10 Mar 2011