Auckland drives up New Zealand house prices

ScreenHunter_06 May. 13 11.32

By Leith van Onselen

The Real Estate Institute of New Zealand (REINZ) has released its August house price results, which registered a big rise in median values nationally driven by escalating prices in New Zealand’s biggest market, Auckland, where the stratified median price hit a whopping $645,653.

In the month of August, the national stratified median price rose by 2.1% to $421,876. Prices in Auckland jumped by 6.5% over the month, whereas those in Christchurch and Wellington – New Zealand’s second and third biggest cities – rose by a more sedate 1.8% and 0.3% respectively (see next chart).

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The price changes are shown more clearly in the below chart, which shows the values in index form since 2005:

ScreenHunter_67 Sep. 16 16.55

On an annual basis, house prices rose by 9.5% nationally in the year to August 2013 to be 10.7% above their November 2007 peak. Prices in New Zealand’s largest city, Auckland, surged by 18.0% in the year to August 2013 to be 26.5% above their July 2007 peak. This was followed by New Zealand’s second biggest city, Christchurch, where prices rose by 6.1% over the year to be 11.1% above their 2007 peak. Finally, prices in the capital, Wellington, rose by 4.4% in the year to August, but were still 0.3% below peak.

ScreenHunter_68 Sep. 16 17.00

This time last month, it looked as though housing loan approvals were faltering. However, both rolling annual and year-on-year growth of loan approvals looks to have ticked-upwards in recent weeks, which should support values in the short-term (see below charts).

ScreenHunter_69 Sep. 16 17.03
ScreenHunter_70 Sep. 16 17.03

Finally, the latest BNZ-REINZ Residential Market Survey of licensed real estate agents around New Zealand “contained no good news for buyers”, with “a record proportion of agents seeing the current market as a seller’s one and investors are increasingly becoming the driving force”. Further, “a net 51% of responding
agents feel that prices are rising – a result consistent with all other months so far this year”.

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Leith van Onselen

Comments

  1. This is how much difference talk of Macrotools makes when far too much lead time is given to proposed changes. Only higher interest rates is going to stop this lot now. Australia hasn’t even started talking about changes yet! So guess where your property prices are going when or if they do…..

    • Yes, it sounds like full froth containment measures are required.

      Level 6 with added prejudice

      http://www.macrobusiness.com.au/2013/09/apra-to-curb-investor-loans/#comment-278820

      There is a clear lesson here – once froth has set in – jawboning, MP and minor interest rate rises may be ineffective.

      Perhaps only actual pain (observed substantial price falls) can cut through the aenesthetic qualities of froth and reset expectations.

      Raises important questions for the slow melt thesis – particularly when one considers how the RBA reacted to kill off any extended and substantial slow melt process and resetting of expectations in Australia.

      It took 12 + months and a massive GFC to get a weak slow melt started – what will it take to get through thick skulls this time.

      • There is no will, either politically or within the banking industry that profited from the previous excess to curb debt growth.

        You would need to be brave to be betting against another asset boom from here.

        The question as usual is when will the rug get pulled out – tempting to think sooner this time – but predicting the future is notoriously hard.

      • aj

        “but predicting the future is notoriously hard.”

        Yogi Bera

        ‘Predictions are difficult especially about the future’

        Boring ? Oh yeah! Dunno how old you are but if you’re young wait till you’ve been trying it till you’re 64!!!!

      • pfh
        “Perhaps only actual pain (observed substantial price falls) can cut through the aenesthetic qualities of froth and reset expectations.”

        Nope!!!! Pain is NOT enough!!!!! This thing has to be killed stone motherless dead. Slain! Slaughtered! Rendered totally lifeless! And kept that way for decades. Anything less it will just rise again.
        The Lernaean Hydra is nothing compared to this monster. It’s been fed for so long it has devoured everything and has so many heads that nothing less than total conflagration will rid us of it!

      • 🙂 That’s me!!!!
        Unfortunately the truth is that in regard to this the longer you run with the stupid tripe the more extreme has to be the reaction to end it. I guess that is how the world operates in general.

      • flawse,

        You cited Yogi! He is my master. Isn’t he wonderful?

        Speaking of Yogi, the baseball season is winding up, and it is as exciting as ever! I hope Oakland A’s are going to make it this time (I kept saying this for many years now). I have been a huge fan of Billy Beane since I read Moneyball in 2005, which has been very useful in my share trading……

    • Janet
      “So guess where your property prices are going when or if they do…..”

      I had a bit of trouble understanding exactly what you were saying there for a minute. So, as long as we run negative RAT rates, its onward and upward for RE even with all the proposed controls! Yep!

      This negative RAT interest rate policy is sure some Pandora’s Box. Once it’s out you can’t stuff the bloody mess back in there. I’m somewhat reminded of John Denver’s song/poem ‘The Box’ that was labeled ‘It’s War’
      http://www.youtube.com/watch?v=Mn6J5vni_O0

      In this case The Box is labeled ‘Stupid moronic negative RAT rate policy’ and yes it ‘bumped the children mainly’ as we destroy their future world to indulge ourselves in over-consumption and make houses too expensive for them to buy.

      But who really gives a RA? Other than the few usual suspects who form some sort of bad extremist rump here in MB everyone wants all this consumption not only to be maintained but to increase.

      Negative RAT interest rates forever! RE to the moon! We’re all gonna be rich! Rich I tells ye!

      BOOM!

  2. It will be interesting to watch NZ – there is so much debt washing through the global system that debt limits in just one jurisdiction probably cannot hold back the tide.

    There is not a solution that is a market tweak that can change this now – a full solution addressing usury, land supply and speculation would be required.

    But it’s not coming – boom and bust it is.

    • ‘a full solution addressing usury, land supply and speculation would be required.’

      ……..and a change in economic philosophy towards adopting a real interest rate policy that reduces market distortion, discourages exponential debt growth and encourages saving for real investment in productive enterprise.

      Just my two bobs’ worth

      • Absolutely – negative rates are a massive part of the global debt problem.

        Edit- I wonder if real rates in just one jurisdiction is enough to hold back a global tide of debt – it’s a globally systemic problem.

      • Yep aj…in such a world not without capital controls!

        That’s why I said ‘a change in economic philosophy’ Probably since USD is the Reserve Currency, and seems to be the source of much of the modern stupidity in economics, it is probably the USA where the change really has to be made.

  3. reusachtigeMEMBER

    lol, just lol. NZ needs lower interest rates so as to make these rising house prices more “affordable”.
    Great work interest rate pullers of NZ, you’ve saved your nation! (coming to a country near you soon, I mean, now)
    Lots of lols this morning.

  4. Increase the tax rate on selling an investment property to 100%, effective in 6 months. That will stop the house prices from rising immediately.

  5. Over $650k for an above average house in Auckland?

    Bloody hell. New Zealand is a nice place but not that nice!

    • And for this price you get a subpar house, badly build, badly finished, small, on a small land.

      crap, in a city half of the size of brisbane with nothing around ( and not much in as well)

      crazy but Australia is better value

      I ll need to help my in-laws to buy there, what a waste of cash.I cannot stand Aukland ( but there are some nice “leisure” farms around outside construction constraint )

  6. Can Janet or someone familiar with the Auckland market please explain REINZ stats for me and whether they include unit prices?
    Does REINZ report median prices for units seperately?

    My mother in-law is in the process of selling her place in Auckland and has been made an offer by her tenant, which I believe is too low (she has been talked into believe the market has turned by her tenant without taking the property to market, which I believe is a huge mistake).