ASB picks Auckland house prices to keep rising

Property

ASB thinks house prices will keep rising in Auckland and the Reserve Bank is still on track to hike interest rates in March.

3rd Oct 14, 3:08pm by Greg Ninness

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The Reserve Bank will be comfortable with recent trends in the housing market but is still likely to hike interest rates in March, according to ASB.

"The housing market has been moderating and at this juncture the RBNZ will be comfortable with developments," ASB said after the release of Barfoot and Thompson's September sales results.

"The Auckland and Canterbury markets remain tight but the situation is not as acute as a year ago.

"Recent data releases suggest the multi-paced housing market of the last year or two should continue, with Auckland and Canterbury house price gains moderating, but remaining stronger than elsewhere.

The big months for housing are October and November and housing developments over those months will be closely monitored for any signs of an unwelcome re-acceleration in activity and house price growth."

In Auckland, Barfoot & Thompson's total listings were down 3.6% on a year ago and dipped 7.4% on last month when seasonally adjusted, ASB said.

"This means that the housing market is still tight in Auckland and that's likely to keep the upward pressure on prices over the coming months."

But things looked a little more promising for home buyers in Christchurch, the bank said.

"The other tight housing market is Canterbury and developments there are encouraging for buyers.

"Inventory was only up 0.1% on the previous month in September but is now 21% up on a year ago, suggesting the market won't be quite as frustrating for buyers this spring as it was last year."

However ASB expected the Reserve Bank to be keeping a close eye on the market.

"The RBNZ has signalled a pause in its tightening cycle and we expect the next hike to come in March 2015.

"There are several factors that should keep the RBNZ comfortable on the sidelines until then, but a significant re-acceleration in housing activity over the coming months would be one development that the central bank wouldn't want to see."

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12 Comments

by RealMe | 3rd Oct 14, 5:18pm 1412309881

Foreign buyers/ speculators will be loving the drops in our exhange rate!

Kiwi's will struggle with higher prices for imported goods and oil etc coupled with another few RBNZ rates hikes and there will be very few who will be able to realistically afford to get into the property market.

Tennants in our own country - looks like it.

by doublegz | 3rd Oct 14, 6:39pm 1412314740

I am expecting a mass exodus of Hong Kong people to countries like NZ & Australia, and I expect the mass migration to Auckland will drive up the house prices further.

by two otherguys | 3rd Oct 14, 6:52pm 1412315556

Yes - the second coming - a repeat of the 1997, 1998, 2000 mass influx into NZ

by denpal | 3rd Oct 14, 8:08pm 1412320135

Refugees from the Northern Hemiesphere have hardly started yet! Japan is basically screwed with radiation poisoning, and California is only saved from the same fate by their drought which stops the eastward drifting radiation washing out in the rain. The Northern Pacific is about dead though from the cesium and strontium from Fukushima. Look at enenews.com. Tokyo should be evacuated informed experts say. The Koolaid MSM won't tell you any of this. Then there is global cooling which is affecting that hemisphere much more than the southern one, helped by increasing northern hemisphere volcanic activity. The Iceland volcano is emitting up to 60,000 tonnes per day of sulphur dioxide pollution, which is 4x Europe's daily average.

We'll need to start charging an immigration tax I'd say as no way will this trend start subsiding as the economic forecasters project. They think it's already peaked!

by muntijaqi | 5th Oct 14, 1:59pm 1412470770

It's funny to read these kind of comments. It seems some people often forget that people don't relocate to places where they don't have opportunities to work in a society where having a job is necessary in order to survive. And NZ is not precisely an attractive country in terms of welfare..

You talk about "natural disasters" and "contamination" as the factors that bring people to New Zealand when the truth is that New Zealand is among the countries with more chances of natural disasters (Europe is mainly Earthquake and Vulcano free and I doubt people are concerned about air quality, which is pretty good in most of the places and where UV radiation is way lower and safer than in Australia-New Zealand).

As an European immigrant in New Zealand it continues shocking me the "fear" about mass immigration in countries with such a low-density of population :-)

New Zealand is an isolated by sea, same as Australia. The illegal immigration is extremely difficult to happen and 99.9% of the arrivals are well controlled as they happen at the airports. Hence the majority of the immigrants will come to New Zealand if and only if their life in New Zealand is better than in their countries. And a life is better if the ratio salary-quality of life is interesting.

Again, if there are not jobs there is no immigration. Market will balance immigration. Legal immigration is always a good and necessary thing, especially for those who came before and are already settled down and have assets.

PS: If I were to loose my job in NZ and unable to find another soon I would leave the country. And like me, most of the immigrants. So if you want to control immigrants' numbers maybe the best approach is to prevent NZ's economy from growing. Willing to do that?

by Crazy Horse | 4th Oct 14, 8:20am 1412364041

Would the ASB say anything else ? ....thank you for the advertorial to promote their business
of selling as many profitable mortgage deals as possible ....

by RealMe | 4th Oct 14, 9:23am 1412367782

Immigration taxes are not dumb.

The strain on our already aging infrastructure is starting to show in a lot of places- footpaths, roads, flooding of streets.

When these developments are plonking 35-40 houses in places where you wouldn't think they could build that many houses without significantly upgrading drainage/ sewage etc, it's a recipe for disaster, for the locals in those areas.

Councils or govts wont care cos it's not in their back yard!

If these so called desireable immigrants bringing their shiny money and investment from overseas are going to actually add value to our country I think there should be more taxes for them.

I.e. If you want to live in the major centres Auckalnd, Wellington, Chch, you pay $500k to the local council for infrastructure tax.

If you set up shop outside these areas no tax, but if you relocate to major centre after 1 year $400k to council, after 2 years $300k. After doing business outside the major centres for 5 years then you are free to expand or relaocate to where ever you want.

Incentivise not to come to our already overcrowded centres and support the provinces.

Could be done but our leaders are gutless while ordinary kiwis deal with the consequences,

by RealMe | 4th Oct 14, 9:23am 1412367829

double post

by RealMe | 4th Oct 14, 9:23am 1412367785

Immigration taxes are not dumb.

The strain on our already aging infrastructure is starting to show in a lot of places- footpaths, roads, flooding of streets.

Councils or govts wont care cos it's not in their back yard!

If these so called desireable immigrants bringing their shiny money and investment from overseas are going to actually add value to our country I think there should be more taxes for them.

I.e. If you want to live in the major centres Auckalnd, Wellington, Chch, you pay $500k to the local council for infrastructure tax.

Incentivise not to come to our already overcrowded centres and support the provinces.

Could be done but our leaders are gutless while ordinary kiwis deal with the consequences,

by muntijaqi | 5th Oct 14, 1:36pm 1412469392

If house prices are going up is because there is a global excess liquidity encouraged by central banks and their interventionism in something so important as the price of the money.

If dairy prices and many other commodities collapse is because this global excess liquidity caused an over-investment in a sector that suffers due to a lack of global demand and an increase of competition in production.

So we have lack of demand (as salaries don't grow at the same pace as productivity prices) and an excess of liquidity based on DEBT that is becoming more and more difficult to pay.

Increasing interest rates is the healthier solution for the long term. It's what will allow a healthier correction (because there will be a big correction), and it's what will allow that the investments are made in productivity and not in speculation.

If dairy prices fall, house prices and debt keep rising, etc. maybe it's about time to start thinking that we should redirect the economy towards a smarter higher added value and higher productivity one.

by muntijaqi | 5th Oct 14, 1:17pm 1412468245

I'm lately a little bit annoyed of some people crying about and blaming "evil foreign speculators" that come to NZ with their shinny money and cheap overseas loans to especulate with NZ houses and fail to see the speculatiors at home. I just don't think it's completely true.

However what I see here is a HUGE pyramid schema where the people on the top are not precisely foreigners but everybody's beloved neighbours and relatives.

The pyramid works as follows:

On the top a bunch of people (usually Generation X) lucky enough to be born (or to arrive earlier) in a country where the first that sees some resource believes his/her right to own that thing and make profit out of it. These people's constantly increasing wealth depends on keeping the pyramid growing and ensure that their position remains on the top. That's why they will often insult Generation Y for what they consider not doing enough sacrifices to afford a house. But the fact is that In 1970 a single-income family could pay a mortgage within 10-15 years, in 1990 it was necessary two incomes to pay a mortgage and in 2010 two incomes are often insufficient to pay a mortgage in 20 years. So it is a fact that affordability is decreasing when looking at income-house prices ratios DESPITE having historically low interests to get indebted.
In the middle of the pyramid there are people who dream with being on the top so they comply with the current situation by investing in real estate (directly or through Kiwisaver, bank deposits, etc.) and by encouraging and tolerating policies that keep the house prices rising. These people, although highly indebted, smile when seeing that their home is increasing value truly believing that they're getting richer everyday. That's why 73% of New Zealanders' assets is in Real Estate.
At the bottom of the pyramid there are a large bunch of fools who believe they have the right not to have shelter but to own their shelter. These people are usually scared of missing what they believe is a ladder of wealth that consists on buying whatever they can afford truly convinced that house prices never go down and that in the future they would be able to sell their often not even insulated, inefficient and remotely located house for a good price (or increase their tenant's rent) and that would allow them to buy something better. These people are often encouraged by the peple above them in the pyramid to take these long-term investmens with high risk in an overpriced market. After all, these people at the bottom and their perception of reality is what keeps the pyramid standing as long as they want/can be part of it.

Disclaimer: This is not merely a NZ's situation. This happens in most of the countries in the world where instead refusing to participate in such a Ponzi scheme, people agree with the statu quo and find it "normal". It's not coincidence that most of the religions removed usury from their list of sins. It's a common issue trying to blame other but ourselves. We all are the market, and markets simply reflect the kind of goods we want and our principles when trading with them. Markets, like jails, reflect the kind of society we have created.

by Grant A | 5th Oct 14, 3:32pm 1412476368

The truth is NZcoolie, interest rates around the developed world are already at the bottom, you can't go much lower than US 25bps, or ECB -10bps. In fact theyre so low the only avenue left to ease further was to print more money (and most are heading to the max on that or having to now pull back), and I suspect we'll see the very negative consequences of that materialise over the next few years. In many parts of the developed world now the scarcy fact is that there is no where left to go if/when there the next major downturn or crisis comes along, hence the reason that desite very inflation or mild deflation, many central bankers right now would dearly love to raise rates to give them so leeway later on, but just can't bring themselves to do so. Sparing a crisis now while theyre in charge is an easier call of what theyre creatign now that will come next

Nearly 7 years of negative real interest rates, and give it even a small part of another 7 years, and you have massively unfunded pension and medical schemes which is ultimately going to reignite the next debt crisis - and what's the olution for that ? it cant be lower rates, they have that already, it cant be more money printing, but they'll probably try that, it will be massive debt defaults, and that mean people's penions and investments gone. We will live to serious regret how this is being handled.