Christchurch, Auckland supply issues drive up property values

A lack of houses in New Zealand's two biggest cities has driven up property values across the country and seen sale prices hit a new record.

Property values rose 1.9 percent in the three months ended November 30 and are 5.7 percent higher on an annual basis, government valuer Quotable Value says.

The figures come the same day Real Estate Institute of New Zealand data shows the median sale price rose 4.3 percent in November to a record $383,250 from a year earlier, and as sales volumes surged 24 percent to 7454.

"Housing turnover has picked up steadily over the past year, as confidence has returned to the housing market underpinned by expectations of low interest rates and gradually improving household confidence," ASB economist Jane Turner says in a note on the REINZ figures.

"Listings data suggest house sales may be constrained by low supply, particularly in Auckland. This implies that demand could be stronger than the level of turnover suggests," she says.

Last week the Reserve Bank flagged its wariness of the Auckland property market, which is starting to strengthen with cheaper bank funding costs leading to increased competition and lower mortgage rates.

That prompted the central bank to warn it may have to hike interest rates if property prices keep rising and lead to another housing bubble.

"Recent building activity figures show an increase in new housing construction in Canterbury and Auckland, which suggests supply is now responding to the increase in house prices and could help alleviate pricing pressures over the coming year," Ms Turner says.

The REINZ figures showed Auckland's median house price rose 1.9 percent from October to a new record median price of $540,000.

Auckland property values rose 3.2 percent on QV's rolling three-month basis and are up 9.3 percent from a year earlier, while Christchurch values advanced 2.2 percent in the quarter and were up 6.3 percent on the year.

Wellington property values increased 0.6 percent in the three months ended November 30 and were 1.7 percent ahead of the same time in 2011. Dunedin values rose 1.2 percent in the quarter and 3.7 percent on the year.

The REINZ Stratified House Price Index, which adjusts for the proportion of higher or lower-value homes sold, rose 7.3 percent from November 2011 to a record high 3544.4.

The national median days to sell fell to 32 to 33 days in October.

(BusinessDesk)

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11 Comments & Questions

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New Zealand's housing situation is a disaster. I want to see some accountability for this.

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Crikey! Let the free market economy do its job and increase the supply of housing in response to the pricing signals... what did we endure the pain of the 1980s and Rogernomics for? Stop meddling.

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We have given power to morons and suffer the consequences. Give back the power and property rights to property owners.

Nothing else will work.

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Uhm... the morons are the people who have been voting into parliament since 1984 - the people who made the policies that have led to this mess. You could say that the people have been bought off with 30-odd years of rising house prices. The politicians have known of no other way to make their constituents feel wealthier. When it all finally corrects, the people will see it all for the chimera it is: no wealth has been created, just wealth transfers and wealth destruction (think NZ sharemarket failure, finance companies) and a price bubble full of hot air based on the opinions of a few buyers and sellers and their agents.

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What... Only 540k?
That's absolute pocket money when converted into real money and what it buys across the ditch.

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Our politicians are getting very rich out of the tax-free capital gains they are making with all their rental properties.
Accountability is not a word known in our political circles.

This property bubble is going to end in tears for a lot of people.
When booms finish there is always a major correction and this time it will be much worse than the last, as this one is not based on extra wealth in the hands of the buyers, but extra borrowed money. Incomes have hardly moved.

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Let the houses gain in value. I hope more people buy houses and fuel the fans of house prices through easy credit available from banks. We seem to have a very short memory and have forgotten that the bigger the gain, the bigger the fall.

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Australia may follow the same path. For the past four months, it has been experiencing a resumption in house price growth, but without an associated recovery in the rate of housing credit growth, or housing finance commitments. See here for details...
http://australianpropertyforum.com/topic/9730200
A similar phenomenon was also experienced early in the recent NZ housing growth cycle, where a lower volume of housing credit chased an even lower volume of housing transactions, resulting in an increase in average mortgage sizes here and rising house prices.

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So how long now before Mr Wheeler lifts the cash rate and kills another raft of exporters?

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Despite what our learned National Party politicians say, it cannot be good for the economy when by far the best investment is to buy an existing house and even leave it empty to get at least a 10% capital gain tax-free.
No other reasonably safe investment that I know of returns that sort of money without hardly any risks and no tax to pay.
Not much wonder very little investment is going into job growth.
The government appears to be looking the other way while this property buying frenzy is going on.

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All the inflation has to show up somewhere. Central banks are actually okay with it going into asset pricing and housing is the best as it creates the so-called "wealth effect" that gets the hoople-heads spending beyond their means again.

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