Real Estate Institute calls for looser LVR rules on sales slump

House prices up but sales volumes down.

New Zealand house prices increased in July but the Real Estate Institute still wants first-home buyers carved out from mortgage lending restrictions in the face of shrinking sales numbers.

The REINZ house price index was unchanged in July from a month earlier and was up 1.2% from July 2016, the real estate agents group said. Excluding Auckland, house prices rose 7.5% from a year earlier, while in Auckland they were 2.1% lower.

Nationwide sales volumes dropped 25% last month compared to July 2016, with Waikato sales dropping 32% and Auckland sales down 31%. The national median house price increased 3.4% to $518,000 in July from last year, while the median number of days it took to sell a home rose to 35 days from 31 days.

Record migration and low interest rates have bolstered the country's housing market, prompting the central bank to clamp down on the level of high loan-to-value ratio mortgages in an effort to reduce the risk to the nation's financial stability.

In Auckland, the country's largest city where rising prices have made housing unaffordable for many, the median sales price dipped an annual 1.2% to $830,000, although REINZ chief executive Bindi Norwell said the city would "likely to be protected from significant price decreases in the short term" due to the housing shortage and population growth.

"The number of sales across New Zealand has dropped significantly in comparison to the same time last year," Ms Norwell said. "A key reason for this is that the two biggest hurdles to purchasing a house right now are access to finance as the banks continue to tighten their lending criteria and LVR restrictions. This creates an intimidating barrier to entry to the real estate market, particularly for those saving for their first home."

"The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers," Ms Norwell said.

On an index basis, Gisborne/Hawke's Bay saw the biggest price increases, up 17% from a year earlier. Prices in Northland rose 15% to hit a new high, with Manawatu/Whanganui prices also rising 15% to a new high.

Nationwide, the number of properties available for sale rose 7% compared with July last year, while in Auckland properties for sale jumped 49%.

More houses moved into the $500,000-to-$750,000 price bracket, with 27% sold for that in July compared to 24% last year. Fewer were sold for less than $500,000, at 47.8% compared to 49.4% a year earlier, and the proportion of houses selling for over $1 million dropped to 12.9% from 13.8% last July.


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