A house with million dollar views sold at auction for nearly a million dollars in Wellington yesterday, which on the face of it doesn't sound any warning for policymakers.
Except that there was a stunned silence when the first bid went in at $910,000 on the property with a capital value of $810,000. The hammer went down at $975,000.
"Sir, he's got his car parked in your driveway. What are you going to do about it," the auctioneer said when it got down to two bidders.
Those following the Wellington property market were not surprised that a 310sqm home situated for sun, minutes from the city it overlooked went for a good price.
Well-located family homes have been selling for good prices for a while in Wellington even though the New Zealand economy has notched up six quarters of negative growth.
The numbers at the auction of 5 Puketiro Avenue in the suburb of Northland were such that the auction was moved outside.
The auction result was evidence of what two commentators have pointed out this week. A shortage of supply is pushing up prices.
Realestate.co.nz noted a shortage in Auckland, Wellington and Christchurch.
While Harcourts International managing director Mike Green said many would-be sellers stepped back six months ago.
"Rather quickly the situation has changed and the fewer properties that are on the market are often receiving multiple offers, with some selling over the asking price. Auctions are also achieving great success in many marketplaces."
Members of Parliament holding an inquiry into bank pricing were told during the first day yesterday that New Zealand's obsession with property was the cause of most economic problems.
BERL chief economist Ganesh Nana said the economy must move from property to production.
New Zealand is travelling again on a well worn path, according to report by economists at Goldman Sachs JBWere today.
"Low interest rates spark a housing market cycle that re-energises borrowing growth and ultimately leads to further deterioration in external balances."
The Reserve Bank of New Zealand is not expected to change interest rates when it considers them next week.
The central bank has said it will keep the official cash rate at or below the current 2.5 percent until the latter part of 2010.
"If the housing market recovery continues on anywhere the trajectory of recent months, the RBNZ will arguably be adding to cyclical volatility by deferring rate hikes," Goldman Sachs JBWere said. Imre Speizer, Westpac's senior market strategist, said it will be interesting to see if Reserve Bank governor Alan Bollard takes the prospect of further interest rate cuts off the table next week. "He should given all the data," he said.
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