By David Hargreaves
The latest BNZ-REINZ residential market survey shows that it's still very much a sellers' market and there are still increasing numbers of investors looking to buy houses.
BNZ chief economist Tony Alexander said that while all the measures of residential real estate market strength eased off slightly this month, practically the same thing happened last year.
"So we do not take this as an early sign that the market is cooling off. The anecdotes in fact suggest the exact opposite..."
The results of the survey included that a net 18% of responding real estate agents were seeing more people going through open homes, a net 37% reported that more written sales were going unconditional, a net 29% of agents reported seeing more investors in the market - which is more than twice the average reading and a strong net 50% of agents view prices as rising.
REINZ figures for March out yesterday showed that the median house price hit NZ$400,000 for the first time, while the number of houses sold was the highest monthly total since May 2007.
There has been a spate of warnings about the rapidly heating state of the housing market, particularly in Auckland. Last month Prime Minister John Key said that all Kiwis might face higher interest rates because of the Auckland market. This week international credit ratings agency Fitch Ratings warned of the dangers for New Zealand of an asset bubble. This followed an earlier similar warning by Standard & Poors. This week also, the Reserve Bank's deputy governor Grant Spencer said the heating housing market might force the RBNZ to push up interest rates earlier.
And then yesterday Finance Minister Bill English said the housing market and the debt that funds its growth was a "risk" that New Zealand had.
"Real progress in increasing long-term savings is within our grasp. It would be a shame to throw it away on another risky housing cycle," he said.
The Government would act where it could to reduce these risks following recommendations of the Productivity Commission last year.
"Decisions to stop or restrict housing development where populations are growing have an effect on the whole economy, not just the local neighbourhood.
"Regulations that drive up housing costs push many families into higher debt, making every New Zealander more vulnerable when things go wrong. The Government will continue to work with regulators, builders , developers and councils to improve housing affordability. We must achieve more affordable housing."
BNZ's Alexander said the trends for all of the measures remained upward in the monthly survey except maybe two.
"One of those is the net proportion of agents reporting that they are seeing more first home buyers. That measure has levelled off in the past year suggesting that perhaps some young buyers are pulling back from seeking a property due to availability and affordability issues. If so then that would be consistent with previous housing cycles.
"But the other non-rising trend is for the measure showing the net percent of agents noticing more appraisals being sought by potential vendors. There is at best a flattening in this measure at a very low level. This is consistent with more detailed measures showing a worsening listings shortage.
Alexander said that at the regional level Auckland and Canterbury stick out as by far the strongest areas.
"We can see some signs of things shifting more toward sellers markets in Hawkes Bay and Nelson/Marlborough. But prices are strongly seen by agents as rising everywhere except perhaps Southland and Northland.
"Over this year and through 2014 we expect to see the strength in Auckland and Canterbury spreading to other regions in the country as happened during the 1990s housing cycle," Alexander says.
"This will involve some older people selling and shifting with cash for spending, and younger people leaving Auckland in particular for cheaper housing and a less traffic-impeded lifestyle elsewhere. These developments however will not stop the worsening housing crisis in Auckland for first home buyers and those at the lower end of the socio-economic spectrum."
Last month's survey sought information on where home buyers were coming from, in response to anecdotes of large numbers of overseas buyers.
Such questions are likely to be put in the survey every three months. In the latest survey agents were asked what proportion of the vendors they were selling for were overseas.
"Of the 500 responses 425 were less than 10% , 44 were 10%-20%, 13 were 20%-30%, then a minor smattering above that," Alexander said.
"If we were to take 5% as the mid-point of the 'less than 10%' selection then on average 7.4% of dwellings sold are on behalf of overseas buyers.
"However the dominance of the 'less than 10%” responses tells us that we cannot do that calculation for this question and present any conclusion this month and instead need to include a new more detailed question running from 1% to 10% next survey," he said.
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