The housing market is continuing to heat up, with sales last month hitting the highest levels for a May in six years, while the super-hot Auckland market saw a new record high median price of NZ$565,000 achieved.
The Real Estate Institute said 7714 houses sold last month, an increase of 7.5% on May last year. The national median house price increased by NZ$1,500, or 0.4% to NZ$392,000, slightly below the record of NZ$400,000 achieved earlier in the year. See here for REINZ's regional statistics.
Significantly, the REINZ Stratified Housing Price Index, which adjusts for some of the variations in mix that can impact on the median price, is 8.7% higher than May 2012 and increased 0.7% compared with April.
It is this figure that is watched closely by the Reserve Bank, which has expressed concern on numerous occasions about the heating state of the market and potential inflationary impact.
The single area of biggest concern for the RBNZ is Auckland, and according to the Stratified Housing Price Indices, Auckland's prices have rocketed by 14.8% over the past 12 months.
The National, Auckland, Christchurch and Other South Island Stratified Housing Price Indices all hit new record highs in May. The Christchurch Index is up 13.1% and the Other South Island Index up 5.4%.
ASB senior economist Jane Turner said the Auckland and Canterbury housing markets remained undersupplied and this continued to place strong upward pressures on house prices in these regions as demand gradually recovers.
"More concerning, is the lift in house prices outside of these regions, where supply constraints are less of an issue. The acceleration in house price inflation in these areas indicate it is becoming increasingly appropriate for the RBNZ to lift the [Official Cash Rate] from very low levels to ease demand," she said.
"Higher interest rates would provide some offset to stronger income growth and increased household confidence. However, at the minute the RBNZ is reluctant to increase the OCR given the elevated trade-weighted [New Zealand dollar] and low inflation pressures.
"Recent communications from the RBNZ indicate it is strongly considering placing restrictions around growth in high loan-to-value lending. While blocking access to credit might choke off demand in some instances, it is unlikely to have much impact on demand for prospective buyers in strong capital positions, particularly while interest rates remain at very low levels.
"We see the OCR as the most effective tool in reducing housing market pressures. We continue to expect the RBNZ to lift the OCR from March 2014."
The RBNZ is expected to leave interest rates at 2.5%, where they have been since March 2011, when it has its latest review of them tomorrow.
Compared with May 2012 the national median house price increased by NZ$23,000, or 6.2%. Eleven of the 12 regions recorded an increase in the median price. However, some 82% of the increase in the national median price compared to May last year occurred in Auckland and Canterbury/Westland.
Other regions recording new record medians in May were Canterbury/Westland with NZ$360,000 and Nelson/Marlborough posting a new record of NZ$353,625.
Compared with May 2012 Auckland recorded the largest increase in median price, up 13%, followed by Central Otago Lakes with 11.5%, and Canterbury/Westland with 7.5%. Manawatu/Wanganui recorded the only fall, down 0.2%.
REINZ chief executive Helen O’Sullivan, said price levels in Auckland and Canterbury were continuing to have a major impact on the national picture.
"There are too few houses coming to market in the Auckland region creating an imbalance between supply and demand and driving up house prices at both the regional and national level," O'Sullivan said.
"The number of residential properties available for sale is falling back to levels last seen when house prices fell in 2008 - 2009. As we know the low level of new builds is well below trend making little impact on the available stock of residential properties for sale."
Since sales volumes started to rise from their Global Financial Crisis lows at the start of 2011, the annual increase in sales numbers in Auckland has been just over 20%. However, the number of listings in Auckland has increased at a little over 3% per annum since the number of listings stopped falling in July 2011. Adding in new builds via the number of building consents issued only increased the supply by 4% per annum since the low of July 2011.
Auckland's biggest real estate firm Barfoot & Thompson recently reported that its listing levels were at historic lows. QV in releasing its latest real estate figures said there was a "somewhat desperate feel" emerging among buyers.
REINZ's regional figures for Auckland show that median house prices in Waitakere rocketed by 22.2% to NZ$490,000 in the 12 months to May - indicating that buyers are looking further afield in an effort to secure houses.
In the old Auckland City region, the median reached NZ$666,000, up 15.4% in the 12 months to May, while in North Shore City the median price actually eased by NZ$20,000 from April's figure to NZ$660,000. But this is still up 11.9% in the past 12 months.
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