The Real Estate Institute of New Zealand (REINZ) has released its April house price results, which registered a modest increase in values nationally, with prices also hitting a new record.
In the month of April, the national stratified median price rose by 0.1% to $447,500. Prices rose by 2.0% in Auckland over the month, by 4.4% in Christchurch, and by 3.8% in Wellington (see next chart).
The price changes are shown more clearly in the below chart, which shows the values in index form since 2005:
Annual house price growth fell to 8.5% nationally in the year to April 2014 to be 17.5% above their November 2007 peak. Prices in New Zealand’s largest city, Auckland, rose by 15.2% in the year to April to be 34.5% above their July 2007 peak. This was followed by New Zealand’s second biggest city, Christchurch, where prices rose by 13.6% over the year to be 25.2% above their 2007 peak. Finally, prices in the capital, Wellington, rose by only 1.0% in the year to April and were only 4.4% above the September 2007 peak.
The below chart shows the annual price growth in trend terms (3-month moving average) in order to smooth volatility, with the trend still appearing fairly weak:
The recent house price gains continue caused some confusion in the market over whether the RBNZ’s macro-prudential curbs on high risk mortgage lending are still working.
House prices continue to rise despite a sharp slowing of sales, with the REINZ reporting that sales volumes were 20.2% lower than April 2013. And while the Easter and Anzac Day holidays have undoubtedly played a role, they do not explain all of the slowdown, according to the REINZ:
“The sharp fall in sales volumes in April has impacted all regions, as well as Auckland and Christchurch where much of the price pressure has been in recent times. The fall in April compared to March 2014 and April 2013 deepens the underlying trend for easing sales volumes. April is generally a softer month for real estate sales coming off the back of a generally strong March and with the added complications of school holidays and Easter. However, these factors cannot explain the entire drop between April this year and April last year – the volume of sales has retreated to 2012 levels, and is the seventh lowest April volume recorded by REINZ. ” [The volume of sales in April 2014 was the seventh lowest April sales volume in the 23 years REINZ has published sales data.]…
“The number of sales in the sub-$400,000 category continue to fall faster than the market overall, suggesting that the LVR restrictions are continuing to have an impact on buyer intentions at the lower price points. . The lift in the Official Cash Rate by 0.5% over the past two months is likely to have also had an effect. At the same time there is increasing activity in the $1 million plus category, not only in Auckland but in a number of other centres as well…
Meanwhile, New Zealand housing loan approvals continue to weaken, as shown below:
Indeed, Deputy Governor of the RBNZ, Grant Spencer, made specific mention of the apparent slowdown in a speech last week, as well as the role played by the LVR restrictions:
“The volume of house sales has dropped considerably across the country, other than in Canterbury, and the slowdown in volume has also been reflected in prices. Without the Loan to Value Ratio restrictions (LVRs), introduced in October 2013, annual house price inflation might be running some 2.5 percent higher,” Mr Spencer said.
Housing supply conditions have also started to improve, with a recovery evident in residential construction. In Auckland, progress is being made in freeing up the supply of buildable land and improving the consenting process. In Canterbury, the replacement of severely damaged homes is well in train after a slow start.
However, the housing shortage remains large and significant increases in building are required in Auckland and Canterbury over the next three years.
In any event, it is best to wait a few more months before drawing definitive conclusions about the New Zealand housing market. Easter and Anzac always affect transactions at this time of year, and it could just be seasonal, especially as prices are still tracking higher.
