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House price inflation ticks higher as sales volumes recover

Tuesday 15th October 2019

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House price inflation continued to tick higher in September and national sales volumes recovered to the highest level for the month in three years, led by activity in Auckland.

The Real Estate Institute's national house price index rose 3.6 percent in the year ended September, up from the 2.9 percent annual pace in August and 1.5 percent in July.

Sales volumes nationally were 5,896 in the latest month, up 3.3 percent on September last year, and in Auckland they were up 6.3 percent.

Annual house price inflation in Auckland remains slightly negative at 0.8 percent but prices in the wider city rose 2.8 percent in the three months ended September. Excluding Auckland, house prices rose 7.6 percent in the latest year, accelerating from the 6.8 percent annual pace in August.

"There were real signs of a winter thaw in September," says Jeremy Couchman, an economist at Kiwibank.

"What's more, strength was seen in Auckland's market, a market that has been dragging headline indicators down," Couchman says. "The worm looks to have turned in the Supercity."

He points to other signs of strength in the data, including that the number of days it took to sell a house fell three days to 37 in seasonally adjusted terms, below the historical average of 39 days.

"Business confidence may have disappointed the Reserve Bank since the August monetary policy statement but at least the housing market is moving in the expected direction," Couchman says, adding that the central bank is still likely to cut its official cash rate next month to 0.75 percent from its current record low at 1 percent.

The expected rate cut, along with the other two this year which have brought the OCR down from 1.75 percent, "should add further impetus to the housing market and housing-related investment," he says.

"Recent policy moves that have targeted the investor side of the market should contain any exuberance.

"We think the housing market will continue to strengthen heading into next year and we expect aggregated price gains to pick up towards 5-6 percent year-on-year in 2020."

House prices rose the most in Southland, up 18.2 percent in the latest year, followed by the Manawatu-Whanganui region, up 15.9 percent, Gisborne-Hawkes Bay, up 13 percent, and Taranaki, up 11.1 percent.

No other region saw an annual house price decline, but Northland prices rose just 1.1 percent and Canterbury was up 2.8 percent.

In the capital, annual house price inflation was 8.7 percent and prices in Otago were 7.2 percent higher than a year ago.

REINZ chose to highlight the median price, which was up 6.6 percent to $597,000.

The reason for the variance from the 3.6 percent HPI increase is explained by a greater number of sales of houses worth more than $500,000 while those worth less accounted for 36.4 percent of sales down from 40.9 percent in September last year.

Houses worth between $750,000 and $999,999 accounted for 17.2 percent of sales, up from 13.9 percent in September last year.

The HPI is the measure RBNZ looks at when formulating monetary policy – it developed the index to iron out price distortions caused by differences in the size and types of homes sold.


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