Auckland’s housing bubble re-ignites

By Leith van Onselen

After declining sharply in the last few months of 2015 and in January 2016, Auckland’s housing bubble has re-ignited, with the Real Estate Institute of New Zealand’s (REINZ) latest housing report revealing that Auckland’s median house price hit a record high $820,000 in March:

ScreenHunter_12567 Apr. 12 12.22

Auckland’s sales volumes, too, rebounded, jumping by a seasonally adjusted 12.9% in March, although they were down 14.1% year-on-year:

ScreenHunter_12568 Apr. 12 12.22

Looking at the broader New Zealand market, the national median price rose by 10% (+$45,000) in March to $495,000, and was also up 4.2% (+$20,000) year-on-year:

ScreenHunter_12569 Apr. 12 12.32

Sales volumes nationally also jumped by a seasonally adjusted 5.4% in March to be up 5.1% year-on-year:

ScreenHunter_12570 Apr. 12 12.33

Full reports here and here.

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Comments

  1. I’m shocked. Who would have thought cutting interest rates would cause house prices to rocket?

    • Look at macro prudential, macro prudential… look, look, I am waving the flag!!!!

      RBNA cannot do anything as long as the flood gates remain open. And open they will remain to be.

      Turnbull has a similar vision as Key’s on this front. Whole generations will save and give so a member can immigrate legally. They think long-term. We think we are rich as our house prices rise.

      Same is happen in Vancouver, and other places in Canada. The bubble may be at the top, but it could take some considerable period of consolidation before it starts to drop. Decades even???

      • I suppose its a bit like QE, we know its bad, but it keeps the wolf away from the door… what to do!

        truth is, after the last QLD election, anyone who is political, patiently understood that the Australia public cannot do tough, nor pain. Abbott and Hockey were rolled for it (although their first budget was a bit unfair).

        Political operators from all persuasions know that if they can talk the talk, (e.g. deficits don’t matter) – people will vote for them.

        He who promises the biggest toys – now wins…

        Same goes for housing. Its been obvious to me, at least, since Malcolm has got into power, the policy of chasing illegal buyers disappeared. There are far more votes in existing owners than new ones. Shorten has been on this page since day one – NG was always a side show that will never make a material difference.

        Even if you dropped NG tomorrow, when interest rates drop here in Oz, houses will boom!!!

      • two points:
        1. price growth has almost nothing to do with immigration but rather easy credit (domestic) speculative demand (house prices are rising only because they are rising – FOMO and expectation of capital gains)
        2. floodgates are already so open that someone needs only money for air ticket and to support himself for a few months here or in NZ. There is no need for whole families to save. A worker in india or china can save enough in couple of years to cover all costs.

      • Point 1 – not wholly true, lowering interest rates do help existing buyers, but if you add cash-up buyers to the mix, they push otherwise existing buyers further out. Has a major overall ripple effect.

        Point 2 – I am referring to legal immigration based on wealth minimums, which is sunk into existing housing stock. The numbers of immigrants that can match that investment/wealth criteria is huge and more importantly, growing!!! Families sent one, student, become a citizen, then use legal family reunion laws to come later.

        Look at capital inflows, then you will see what I am saying is true. So despite a milk and mining crash, the two economies have held up relatively well, incredibly well in fact…

      • +1 The requirements for a modern RB governor are to slash rates at any opportunity including when effective MP (i.e. a max LVR of 50%, etc) is not in place and in full knowledge that the slashing will lead to more hyperdebt to support hyperinflating/hyperinflated house prices.

  2. what these fake macroprudentials do is just pushing credit from transparent and legal market into shadow and black market and by that making a problem even more dangerous

    • One could also MP has absolutely no effect on foreign cashed up buyers – as we are seeing now… if you are using cash and not debt, they are entirely irrelevant.

      • Macroprudential controls – like the LVR restrictions implemented by RBNZ – have little or no impact on cash or high equity buyers. One could be confident that most foreign purchasers are not borrowing in NZ Also many second time or subsequent domestic buyers would be sitting an a high level of equity due to the growth in Auckland property values over the last few years.

        In fact these discrete cohorts of purchasers are probably advantaged by macroprudential controls because they remove some of the competition!

        Australia, NZ, Canada offer “safe haven” to foreign investors (mainly Chinese) because the property title systems (all based on the Australian Torrens system) all provide certainty of ownership, the political environment is relatively stable, and the relatively large inflow of cash from overseas provides significant upward pressure on property values. And of course, because nobody in any of those countries is interested in enforcing the law!

  3. Some sobering stats. New Zealand debt is comprised of:
    Public Debt ~$117 billion
    Agricultural Debt : ~$60 billion
    Business Debt : ~$90 billion, and
    Household Debt : ~ $230 billion
    There’s 4.5 million of us to look after that lot ~ $110,000 for every man woman and child. The national average gross wage is ~$51,000 per annum (48 percent of people Northland Region have an annual income of $20,000 or less), and the national median house price is $495,000
    I don’t know if I need to write more to explain why I reckon….we’re done for.
    I said I’d give it until November 2016 ( never, ever expecting it to come to that!) and then….even I’m off…..

    • (NB: I’ve used gross figure above, because as many of us found out in ’87, the offsets to give a Net Figure can sometime be worth $0 )

    • Oh dear. NZ per capita GDP is about $48,000 NZD. You’d better get busy selling the joint to the clever Chinamen if you want to service that and still be able to import stuff.

    • Median house price in Manukau is $770,000!! Manukau is an absolute shithole scattered with poverty, crappy liquor stores and $2 shops.

      The Emperor is clearly wearing no clothes with a populace that seems to think this is normal.

    • Genuine question Janet – so where are you off to? I’m interested in where you think might be better – in the US with Lord Dud?

  4. MP is a local policy measure and does nothing to stop international capital flows… IR or not….

    Capital wanted unfettered access to global markets under the pretense of being more “efficient” more like seeking yield or creating it out of whole cloth. See the Plaza Accord post I posted some time back, where capital banks lost traditional market share to the shadow sector and then sought new yield in C/RE….

    Skippy….. mix and let ferment a few decades…. lol high alcohol content…. boom…

  5. With the madness still in full swing in Vancouver and now again in Auckland im certain our bubble is not gonna pop so easily unless a global shock was to occur because it seems our establishment will throw everything at it to prop it up hence its no surprise the ATO or FIRB isnt bothering in the slightest with the hordes of money launderers active in Sydney and Melbourne ….