By Bernard Hickey
The boom is back, in Auckland at least. House prices and sales volumes are now rising at double digit rates in New Zealand's biggest city, and the Spring open home selling season has only just started.
Auckland's biggest real estate agency group, Barfoot and Thompson, has reported it handled the sale of 1,016 properties in August, up 34% from August a year ago. It expects that lift in activity and prices to continue through Christmas.
This was the highest August sales in New Zealand's biggest property market since August 2003 when the property boom from 2003 to 2007 began. Interest rates are at record lows of around 5% and are expected to stay there for at least another year, while bank lending criteria have been loosened substantially over the last year, making it easier for first home buyers and rental property investors to borrow with higher loan to value ratios.
Barfoot and Thompson reported its average sale price rose to a fresh record high NZ$592,395, up 11.6% from a year ago.
“In terms of sales numbers we are certainly in a period of high activity as in the previous four years we sold 1000 homes in a month on only one other occasion (in March 2011)," said Barfoot and Thompson Managing Director Peter Thompson, adding that prices were holding firm against those for the last quarter.
“However, this high activity is not resulting in prices escalating. In August the average price was $592,395, less than a $1000 higher than the average price in July, and in the last three months the average price has increased by less than 2 percent," he said.
“While prices are significantly ahead of those for the same period last year, the demand for property through the winter months meant that the traditional dip in values did not occur."
During August Barfoot and Thompson listed 1,417 new properties, up 9.4% from July and up 10.5 from August last year.
However, the number of properties on Barfoots' books at the end of August was 3,777, the lowest in 10 years.
“High end properties continue to be in demand, and during August we sold 83 properties for in excess of $1 million. In the past 8 months we have now sold on average 71 properties a month for more than a million dollars, compared to 47 a month for the same period last year," Thompson said.
“These sales figures are a reflection of people’s growing confidence across all price segments in the future of the Auckland economy, and the future direction of the Auckland housing market," he said.
"The next three months normally represent the peak season in the year for house sales, and all the indications are that the current level of activity will be maintained through till Christmas.”
Barfoot and Thompson's market analysis shows volumes and average prices broken down by region in Auckland. See the analysis at Barfoot's here.
The strongest growth in sales volumes was in Auckland Central suburbs (Herne Bay, Grey Lynn, Ponsonby, Mt Eden, Epsom, Remuera, Parnell), Eastern suburbs, Rodney, South Auckland and West Auckland. Volumes in North Shore, Pakuranga and Howick were flat in August from a year ago.
The average price for the Eastern Suburbs rose 48% in August 2012 to NZ$877,177 from NZ$592,332. The number of sales in that area rose 34% to 102.
The average price for Central Suburbs properties rose 8.3% to NZ$726,791 from NZ$670,974, while the number of sales in that area rose 43% to 200. North Shore prices rose an average 14.5%, but the number of sales was flat at 186. South Auckland's average price rose 20% to NZ$424,112 while the number of properties sold rose 64%.
Franklin/Manukau prices fell 2.9% to an average NZ$432,577, while Rodney prices fell 5% to NZ$502,702 and West Auckland prices fell 2.5%.
ASB economist comments
ASB economist Jane Thompson said Barfoot and Thompson Auckland house sales were firm and rose 1.4% in the month seasonally adjusted and was at its highest level since May 2007.
"The listings data suggest that the Auckland market remains supply constrained and that Auckland demand could be stronger than what turnover is implying," Turner said.
"Housing demand has recovered in light of low interest rates, increased confidence in the housing and steady (albeit gradual) improvement in household incomes and confidence. The lift in housing demand is also consistent with the surprising resilience demonstrated in consumer spending data, which indicate growing confidence to invest in household purchases," she said.
Supply appeared to be responding to the stronger housing market conditions with strong sales prices encouraging potential sellers to list.
"Nonetheless, the number of new listings remains relatively low and the increase in supply was insufficient to meet demand. The overall number of houses available for sale has declined to its lowest ever level recorded (ASB seasonally-adjusted estimates)," she said, adding the market was now less supplied than in previous housing booms.
"The market remains under supplied and this will continue to place upward pressure on house prices. While new listings are now starting to lift, they still remain at relatively low levels. A more meaningful increase in dwelling construction is likely to be needed to alleviate some of the supply constraints and house price inflation pressure. The lift in house prices should encourage an increase in construction demand in future."
ASB said the housing market elsewhere in New Zealand appeared to be slightly more subdued.
"The RBNZ has indicated that recent housing market developments are in line with its expectations. The ongoing Eurozone debt crisis, risks to global growth and the elevated NZD will continue to dominate the economic outlook over the near term. We continue to expect the RBNZ will leave the OCR unchanged at 2.5% until June 2013."
(Updated with more detail and quotes from Barfoots and ASB)