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NZ property values rise at a 7.6% annual pace in June

New Zealand property values rose at a 7.6 percent annual pace last month as demand continued to outstrip supply in Auckland and Christchurch, state valuer Quotable Value says.

Property values stepped up the pace from last month when they increased at a 7.1 percent annual rate, also driven by demand in Auckland and Christchurch. Values increased 2.8 percent in the three months ended June 30, up from a 1.7 percent quarterly pace in May, the agency said.

"The strong increase in values is largely constrained to Auckland and Canterbury, with values across the rest of the country still largely subdued," QV operations manager Kerry Stewart says.

New Zealand's Reserve Bank is planning to use new macro-prudential tools to restrict the volume of low equity mortgages as pressure in the housing market poses a risk to financial stability.

Most economists expect the central bank will also raise the benchmark interest rate from a record low 2.5 percent next year in part to contain the housing market in Auckland, where a supply shortage has driven up prices, and Christchurch, embarked on a massive rebuild after the earthquakes.

Auckland property values were 12.6 percent ahead from a year earlier, while Christchurch values increased 10.4 percent and Wellington values gained 2.6 percent, the agency said. Hamilton property values edged up 3.9 percent from last year and Dunedin values rose 4 percent.

"There is little sign that values will slow in Auckland in the immediate future," Mr Stewart says. "The number of properties for sale is continuing to drop while demand remains strong. Christchurch is also suffering from a shortage of stock leading to upward pressure on prices."

House values are 6.2 percent above the previous market peak of late 2007, QV says.

House prices in New Zealand are 25 percent over-valued, the International Monetary Fund said in May. Prices rose 8.4 percent in the year ended June, based on the Real Estate Institute's stratified median housing price index, led by Auckland and Christchurch.

Provincial centres are seeing some gains, with previously slow or declining areas such as Gisborne and Whangarei now picking up, QV says. Values in Taupo, Bay of Plenty, Rotorua, Gore and Invercargill still decreased in value.

(BusinessDesk)

Comments and questions
9

Where is the Reserve Bank?

Reserve Bank of New Zealand
2 The Terrace
PO Box 2498
Wellington 6140
New Zealand

Simple stuff, Econ 101- when demand exceeds supply the price can only go up.
Very little the Reserve Bank can do re prices. Banking stability is another question/issue.

If Banks give out up to 500k 100% mortgages to couples on $60k each, then the prices will go up on a wave of cheap (at the moment) money.

Regulation is advisable concerning this sort of lending - paricularly if the mortgages are then packaged up into securities.

That is what I consider Econ 101.

If demand for housing is so out of whack with supply then why aren't rents rising at a similar sort of rate as purchase prices? There is a more accurate name for Auckland's housing market.... a ponzi scheme.

People are monetising their homes because all the other savings/investment vehicles out there are terrible options.

When it takes +5 years in Auckland to gain the required consents to build a new house (from personal experience) it's not rocket science we have supply issues. Combine this with very low interest rates and the perception of property as a low risk, high return investment option this is what we are seeing. Don't blame the people meeting the market at auctions, just turn to Lenny and Bob and you have your answer. High property values = increases in CV, which = higher rates!

For an average period of five-plus years to get final consent from the Auckland Council, a normal housing developer would surely incur a substantial amount of interest. Do bear in mind that most developers are financed by finance companies charging a yearly interest of at least 10%. For them to make a reasonable profit, they in turn will have no other choice but to raise their new house prices! Who should we blame, eh, anon?

Considering that a buyer will pay back triple the loan on maturity due to interest I am perplexed people see Auckland property as a sound investment, particularly those lending out these enormous sums of money.