NZ house prices rebound on soft volumes

ScreenHunter_08 Jul. 01 09.14

By Leith van Onselen

The Real Estate Institute of New Zealand (REINZ) has released its August house price results, which registered a rebound in values following three consecutive months of fall, but another slowing in annual growth.

In the month of August, the national stratified median price rose by 1.1% to around $442,000. Prices were up in two of the major capitals – i.e. up 5.5% in Wellington and by 0.4% in Auckland – but fell by 0.8% in Christchurch. Over the quarter, prices fell were dead flat (0% change) nationally, although rises were recorded in each of the major capitals.

ScreenHunter_4181 Sep. 12 10.27

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

ScreenHunter_4182 Sep. 12 10.28

Annual house price growth slowed to 4.8% nationally in the year to August 2014 to be 16.1% above the November 2007 peak. Prices in New Zealand’s largest city, Auckland, rose by 5.8% in the year to August to be 33.9% above their July 2007 peak. This was followed by New Zealand’s second biggest city, Christchurch, where prices rose by 11.0% over the year to be 23.3% above their 2007 peak. Finally, prices in the capital, Wellington, rose by 2.8% in the year to August and were 2.5% 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 annual price growth clearly weakening:

ScreenHunter_4183 Sep. 12 10.31

And the next chart shows growth at the national level only, which paints an even clearer picture:

ScreenHunter_4184 Sep. 12 10.32

The overall weakening of price growth amid the strengthening domestic economy and rising population growth suggests the RBNZ’s macro-prudential curbs on high risk mortgage lending and recent interest rate increases are still working.

Other indicators support this contention.

According to the REINZ, sales volumes were 16.3% lower than August 2013. In a similar vein, New Zealand housing loan approvals continue to fall, as shown below:

ScreenHunter_4185 Sep. 12 10.38

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