Invercargill’s house prices have grown by 2% in the last three months, painting a relatively rosy picture for the southern city, according to a CoreLogic report for July.

The average value of an Invercargill house, as of August 3, was $361,922, up 2% from May 1.

However, CoreLogic head of research Nick Goodall cautions that the Southland house market is vulnerable to a nervous market.

“[The] recent closure announcement of the Tiwai Point Aluminium Smelter, which is a large employer across the Southland region, points to a more vulnerable outlook than would have otherwise been the case,’’ Mr Goodall said.

The CoreLogic QV House Price Index is the most comprehensive long-term measure of house prices as it includes agent and non-agent sales. It also includes some recent sales before the unconditional date of sale.

The July report illustrates the national property market is holding firm, post-Covid, but Mr Goodall noted the national “sense of optimism’’ is “tempered with a note of caution as to what the near-term future holds’’.

“Given the authorities’ commitment to financial stability we maintain a position of no-to-low negative value growth moving through the end of 2020,’’ he said.

Nationally, the house price index rose by a marginal 0.2% from June, but that was a turnaround from May, when the price index dropped by 0.2%.

The lift of 0.4% since May 1 began as the nation emerged from level four lock down, during which time transactions were difficult to complete.

The Government and retail banks have offered significant support in the way of wage subsidies and mortgage deferral schemes, but these are due to end.

Mr Goodall noted there have been discussions about continuing the schemes, but that would seem more likely in the event of a local Covid-19 outbreak.

“Anecdotal evidence is suggesting the share of people unable to resume paying their mortgage repayments is relatively low, and the latest NZ Activity Index (NZAC) has shown economic activity in June essentially returned to the same levels as last year, a remarkable recovery from the level four lockdown in April”, Mr Goodall said.

The Reserve Bank is keeping interest rates in low, which is helping people keep their mortgage repayments in check.

Mr Goodall said this Wednesday’s monetary policy statement was unlikely to spring any surprises.

“The main factor providing nervousness in the market, is the forecast unemployment rate. Many economists have scaled back their forecast peaks, however the rate is still likely to more than double, from 4% to almost 10%, which is a level not seen since the early 1990s. Small business health, and the transition away from wage subsidies, will be the key factors here,’’ he said.

A separate analysis of the Queenstown market (down 4.2% since 1 May) shows the upper tier (house prices above $1.6m) suffering a total of a 10.5% drop in value since 1 Feb 2019. In contrast, the decrease in the $780k-$930k bracket has ‘only’ been 4.3% since the same date.

Mr Goodall said these recent drops in value won’t be entirely attributable to the closing of New Zealand’s borders, but Queenstown was vulnerable to the loss of the international tourism dollar. 

“Of all tourism spend in each of these centre, 65% is international in Queenstown, while the respective figure is 55% in Auckland. 

“Domestic spend has and will be able to make up some of the loss, but this is unlikely to be sustainable long term, meaning plenty of focus will be on the future of border closures,” he said.

Other areas of vulnerability, due to a larger reliance on internal tourists, include the Mackenzie District (69%), Westland District (63%), Southland District (57%) and Kaikoura District (53%). 

Mr Goodall said Rotorua only has a 40% reliance on international tourism, compared to domestic (60%).