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House prices rose in February but sales volumes fell 9.5%

Wednesday 13th March 2019

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House prices rose in most parts of the country except in Otago and Southland in February but the number of residential properties sold in the month fell 9.5 percent in what is normally a month of strong activity.

Real Estate Institute figures show its house price index increased 1.6 percent in February, boosted by a 1.7 percent rebound in the still sluggish Auckland market. The index is up 3.2 percent nationwide from February last year.

Auckland prices are down 2 percent from a year ago, but prices excluding Auckland are up 8.1 percent for the year.

There were 5,954 homes sold nationwide in the month, down from 6,576 in February last year. Sales volumes fell in 13 of the 16 regions the institute divides New Zealand into. Sales in Auckland were down 17.9 percent compared with February last year.

“The lower level of sales volumes compared to the same time last year can be attributed to a number of things – the raft of legislative changes impacting the housing market at the moment, the increasing difficulty in accessing finance – despite a record low official cash rate and very low mortgage rates from the banks – and vendors’ pricing expectations,” says institute chief executive Bindi Norwell.

“What we’re hearing from salespeople around the country is that vendors and investors are taking a ‘wait and see’ approach to the housing market – much like you would normally see around election time,” Norwell says.

“This is particularly true in relation to the recently announced capital gains tax proposals from the tax working group,” she says.

Families want to know what aspects of the proposals the government will adopt and what impact they will have, Norwell says.

Jeremy Couchman, an economist at Kiwibank, says the national data “masks the array of different experiences seen across the country".

Stripping out recent volatility due to factors such as the foreign buyer ban which took effect in October and the Reserve Bank’s looser loan-to-valuation rules from January, “we see a housing market that is well contained and consistent with our view that the housing market is likely to move sideways through 2019.”

The data on the Auckland market “feels like a moderation …. following earlier excesses,” Couchman says.

“The housing market is still well supported by fundamentals. We still have a massive shortage of housing, mortgage rates at or near record lows and we have an unemployment rate that is consistent with full employment,” he says.

The unemployment rate stood at 4.3 percent in the December quarter.

“The Auckland experience is somewhat unique compared to other regions,” Couchman says, noting that annual house price appreciation in the Manawatu-Whanganui region was 19 percent and that it remains at double-digit levels in Wellington, Hawkes Bay-Gisborne, Otago and Southland. 

Canterbury also stands out with house prices rising just 1.2 percent in the year ended February and sales volumes down 3.3 percent in the year, reflecting the impact of the rebuilding since the 2011 earthquakes.

The house price index was developed by the Reserve Bank to smooth out greater or fewer numbers of cheap or expensive houses being sold in any month and to take into account the size of houses being sold to reach like-for-like numbers.

But REINZ continues to headline its own median house prices which rose 5.7 in February from the same month last year.

The discrepancy between that and the index’s 3.2 percent annual increase is explained by the fact that the number of homes sold for less than $500,000 fell to 41.5 percent of total sales this year, compared with 45.8 percent in February last year.

On the other hand, the number of homes sold for prices between $500,000 and $749,999 rose to 30.7 percent from 27.7 and those sold for prices between $750,000 and $999,999 rose to 15.3 percent from 13.4 percent.

However, properties sold for more than $1 million eased to 12.5 percent this February from 13.1 percent February last year.


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