House prices increase in all regions but Auckland

by Ewald Biesenbach

House prices increase in all regions but Auckland

Four regions reach record highs House prices across the country have continued to rise in July, up 6.2% year-on-year with a median price of $550,000.

According to the latest data from the Real Estate Institute of New Zealand (REINZ), Auckland was the only region to record a minor fall of 0.1%.

On the opposite end of the spectrum, four regions saw record prices in July:

Northland (+5.7% to $481,000) Taranaki (+15.4% to $375,000) Nelson (+15.2% to $547,000) Marlborough (+13.4% to $453,500), the second record month in a row. REINZ also reported a slight increase in the number of houses sold (+0.7% nationwide, +2.1% in Auckland), and revealed that the time to sell a property was steady year-on-year at 37 days (from 36 days in July 2017).

Lack of supply putting pressure on prices “The shortage of properties available for sale across the country is continuing to push prices up in all regions except for Auckland,” said Bindi Norwell, REINZ chief executive.

Last year, the MBIE estimated a shortage of 71,194 houses (44,738 in Auckland), but recent figures appear to be much higher: according to Kiwibank economists, New Zealand needs 100,000 new houses nationwide.

West Coast has ‘first-home-buyer appeal’ With 56.6% of all houses costing less than $250,000, the West Coast remains the most affordable area for first-home buyers, according to Norwell. Only one region, Nelson, has no properties below the $250,000 threshold, and only 1% of Auckland’s properties are under that value.

As Auckland’s median price remains steady at $835,000, a growing number of first-home buyers are considering relocating to the regions. And they’re not the only ones. A report from KiwiBank has recently revealed that a growing number of Auckland Baby Boomers are selling off their land through subdivision and relocating to more affordable areas, like Northland, Manawatu-Wanganui, Hawke’s Bay, Southland, and the Waikato.

‘House prices could fall’ Reserve Bank governor Adrian Orr has warned that house prices could fall, at least slightly (similarly to the 5% drop recorded in Sydney). “A house price decline does not mean a housing market crisis. Far from it,” he added.

As for the LVR ratios, the RBNZ remains convinced that removing the restrictions could cause lending (and house prices) to rise faster than expected. An announcement is expected in mid-October.

Foreign buyers ban kicks in The Overseas Investment Amendment Bill has passed. Except for new apartments in large-scale developments, non-residents are no longer allowed to purchase property in New Zealand (excluding buyers from Australia and Singapore).

It’s too soon to determine if the ban will have the expected dampening effect on the housing market.

QV general manager David Nagel was cautiously optimistic. “It’s likely to be a further boost for first-home buyers,” said Nagel. The reduced activity from overseas buyers, combined with easing competition from investors and migrants, “may add to the opportunity for first-home buyers to gain a larger slice of the pie.”

But others were more sceptical. According to REINZ chief exec Bindi Norwell and Property Institute CEO Ashley Church, the impact on buyers will likely be minimal, given that foreign investors currently account for only 2.8% of total buyers and 1.2% of total sellers (source: CoreLogic).

“Increasing the level of supply, speeding up the consenting process, creating consistency at councils around New Zealand and reducing LVR restrictions for first-time buyers are all more appropriate measures that will help with affordability ahead of banning offshore investors,” Norwell said.

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