Annual house price inflation in Auckland is now running at just under 20%, according to the latest monthly figures from the Real Estate Institute.
The REINZ Stratified Housing Price Index, which adjusts for some of the variations in mix that can impact on the median price, shows that Auckland prices were up 19.8% in June compared with a year earlier. The index hit an all-time high for Auckland.
The annual inflation figure compares with just 14.8% a month earlier.
On a national basis, house price inflation is 8.4% higher than June 2012 and eased very sightly compared to May. The Christchurch and Other South Island Price Indices also hit new record highs in June, with the Christchurch Index is up 10.6% and the Other South Island Index up 7.3%.
REINZ data shows there were 6135 unconditional residential sales in June, equal to the number of sales in June 2012, and a fall of 20.5% compared with May 2013. However, on a seasonally adjusted basis the volume of residential sales was up 0.6% compared to May, and up 6.1% compared to June 2012.
The national median house price increased by NZ$2000 (+0.5%), from NZ$392,000 in May, to NZ$394,000 in June. Compared with June 2012 the national median house price increased by NZ$22,000 (+5.9%), with seven of the 12 regions recording an increase in the median price.
Auckland's median price eased back from last month's record NZ$565,000 to NZ$555,000, but the month's median price was nearly 25% higher than for the same month just two years ago.
See here for regional figures.
REINZ chief executive, Helen O'Sullivan said the shortage of listings right across the Auckland region was "becoming a major concern for many agents". Demand remained strong from both first home buyers and investors, she said.
Auckland's biggest real estate firm Barfoot & Thompson last week reported its house listings were at an all-time low, while Realestate.co.nz reported the national housing inventory was at historic lows.
Although the national annual house price inflation figure has eased somewhat in the past month from 8.7%, the very high Auckland figure will do little to sooth the Reserve Bank, which is now talking up its prospects of introducing "speed limits" on high loan to value lending as a way ensuring continued financial stability and potentially of taking some heat out of the housing market.
The bank's concerned that a sudden sharp fall in property values could cause financial stability problems. Interest.co.nz analysis of past household credit figures suggests households might be more vulnerable to the effects of a bursting housing bubble this time around than they were in the run-up to the last housing boom in the early 2000s.
ASB economist Christina Leung said recent construction data indicated the stronger house price growth in Auckland was starting to encourage house-building demand.
"However, we expect it will take a few years for new housing supply to catch up with the growth in housing demand, and the housing market likely to remain tight for some time.
"The acute housing supply shortages in Auckland and Canterbury are driving continued house price growth in these regions, and the true extent of housing demand may be stronger than housing turnover figures suggest," she said.
"Elsewhere, the lift in housing demand has been more modest."
Leung said the RBNZ had indicated it was looking to introduce restrictions around growth in high loan-to-value lending later this year, with finalised changes scheduled to be announced in mid-July.
"We expect this will have a limited effect on housing market pressures, and still consider the [Official Cash Rate} as the most effective tool in reducing housing market pressures. We continue to expect the RBNZ to first lift the OCR in March 2014."
REINZ director Bryan Thomson said price levels in Auckland and Canterbury were having an increasingly significant impact on the national picture. Canterbury recorded the largest increase in median price compared with June last year, and Auckland the second largest increase in median price. Together both regions accounted for 99.6% of the NZ$22,000 increase in the national median between June 2013 and June 2012. Price gains in most other regions had been minimal.
"The continuing strength of house prices in Auckland and Canterbury is being driven by the rising imbalance between supply and demand, with the number of properties coming to market from new builds and existing owners falling well short of the demand for housing. The number of houses available for sale is an issue for most regions in New Zealand; however, the problem is most acute in Auckland and Canterbury.”
“There appears to a change in market behaviour with rising prices and demand for housing in Auckland and Canterbury not being enough to increase the number of listings. While the growth rate in sales in Auckland has averaged around 20% for the past two years, the growth in the number of listings has been almost negligible. Normally we would expect the number of listings to increase more rapidly coming out of a downturn, but as yet, this does not appear to be happening.”
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37 Comments
Aside from the massive price growth two items that *might* signal a coming inflection point towards the end of the year.
1) There was no volume growth from last year
2) Mortgage approvals by number and value are now decreasing on the prior year
Price tends to lag movements in volume by around 4 months. It will take more than just one month to confirm this as a trend.
Only if you promise not to laugh: "The [Housing] Bill is all about reform of the building control system...The country suffers from high building costs. Those high costs can be attributed to complicated system of building controls." - Hon Graeme Lee, Minister of Internal Affairs, gets bipartisan support for legislation that will tame unruly councils and usher in an era of innovative but safe and healthy building. (20 November 1991).
It all sounds very dramatic.
I bought a house in 2003 betting on a supply shortage and was told it would double in value in ten years (which I thought was a joke). According to these figures that suburb has. But what they didn't mention was inflation of 27% in that time taking 100K, topping up the mortgage costing 50K, major repairs being like 50K. When you then look at what's left and think that's all one earned for 10 years dealing with some very unpleasant people (as well as some nice ones) ... not worth it.
A family friend bought a hardie board 1980s dump in Glenfield, North Shore, Auckland. Was owned by an Indian.
Glenfield is an Indian immigrant slum thanks to PC "multicuturalism" which "creates vibrant communities".
Matresses on the floor in every room, stinks like anything, kitchen and bathroom need to be ripped out says builder.
Paid north of $500000 for it.
Auckland we have a problem!
well, all I can say is I sure am glad I got out of Auckland. Crazy rising rents and prices, ridiculously high fuel costs, scary grocery prices....Unless you earn a LOT of money Auckland is fast becoming a really expensive place...is it worth it, especially with its terrible traffic and crappy winter climate? Sure its got some nice beaches, an OK CBD and restaurant scene....
Still reckon it's only a 'mini-boom' MIA?
Rents aren't actually rising that quick at all, in fact with all the rentals flooding the market some areas are experiancing an overflow in Auckland.....
Didn't you hear we are getting a rail loop and a tunnel to north shore to save us ;)
Rents are falling in some areas. In Auckland, our landlord (recently moved with kiwi wife / kids) has "offered" the same rent for another year. We can definitely get more for less. We are happily renting at this point. Nice house, pool etc - will buy when it feels right and we find the right place.
What "investor" would be buying now? The return is woeful, the capital gains minimal (prices can't get much higher, there is no new paradigm unless you turn Aucks into Hong Kong) and all the signs are there to exit the market - the endless "property investing" ads on talk radio, bank tellers and taxi drivers telling you to get in the market now before it's too late, the gushing coverage in the media of estate agent's press releases.
All very reminiscent of Ireland a few years ago but definitely with less supply. But I don't buy the supply as the main cause of this boom, it's cheap money and foreign investors looking for a home for their money.
Having met plenty of people who bought at the top in UK and Ireland over several cycles I'd be slapping a great big warning sticker on any property sales material right now. It's awful when it ends in tears and you meet the first time buyers stuck with a lump of sh*te on the edge of town and the prospect of working 10 years before it's worth what they paid.
That said, if you want to sell off your houses to foreign investors without any restriction then this one could run and run...! It will only stop when they realise it's perceived as no longer a good investment.
Ha ha! I think that truism was one of the founding principles of the celtic tiger! There was no memory of a crash in Ireland, maybe a few slowdowns during 70's so the attitude was the same.
I can see the strongly held belief in that view and if you base your views on the last XX years then I can see why that would be commonly held. But that doesn't stop it being a bonkers truism!
I'm not predicting a crash but maybe 10+ years of slowly deflating house prices? But if there is any kind of shock to the system then it will be messy.
True enuff Macbet...It will run fast and slow but keep running because of the cheap easy credit...the foreign loot and the poor to below zero returns on bank savings in NZ.
At some stage 'Humpty' will fall off the wall and when that day comes, expect the Beehive banking toadies to blame others for the chaos.
The best plan for a peasant is to avoid debt and spread the savings to avoid the thieving to come.
Looks like 'Humpty' is falling!...."German exports declined in May at their fastest pace since 2009 because of the slowdown in key European and China markets, adding to worries that the country's recovery was losing momentum."
http://globaleconomicanalysis.blogspot.com/#6O8s0B7eMqOGxKzI.99
is it still only a 'mini-boom'? Yeah, probably I reckon. At some point something will be done to calm it down - if nothing is done the country faces a good chance of future financial and / or social ruin.
Having said that, NZ's local and national governance is so appalling, with policy responses so slow, that who knows whether anything will ever be meaningfully done - at least not before it's too late.
To be frank, I've given up really trying to guess what the hell might be done, or what might happen. I view things with interest from across the ditch
So many opinions on this subject which is basically about the age-old human problem of greed and self-interest. And no one seems to have any answers. It will never be any different from generation to generation. Try to be kind to each other out there. Its a hard world for a lot of folk.
My rusty Excel skills show me that, at an annual compounding rate of 19.8%, and a starting average of $555K, it will take around - um - between three and four years for the average price to hit the Magic Million.
Not quite shure whether to laugh or cry, but....
Couple this up with a predicted interest rise at some point, and I think that there'll be Tears before Bedtime.
Unless, with the same logic as wot applies to Fiat Munny, we can just decree that Incomes will henceforth be indexed to AKL hoose prices.
Thankfully it does not appear that increasing house prices has led to irrational consumer spending or significant credit growth as yet. Hopefully people have learnt their lesson over recent years. Asuming people have learnt their lesson, any pull back will have very minimal impact.
As always, you've just got to earn more than you spend and everything should be fine!!
went to an auction across the road from us here in devonport on sunday. 100yr old villa, owned since 1950s and not looked after at all. massive do-up - a total sh*t hole, really, with nothing not needing replacing except the original villa has to be kept due to heritage listing. 501m section. i knew of three families at the auction looking to live in the squalor and slowly do up as they could afford. they were quickly left behind by a bidding war between chinese guy with heavy chinese accent so i'm guessing a recent immigrant maybe or overseas buyer, and a pakeha property developer. developer won, paying just over $1m. he is going to do-up and flick. don't know how he'll make money but hey, no-one there including me thought it would go for a mill so what do i know? all i can say was it was surreal and depressing.
We were renting in London (SW London) back in 2004-05. Our landlords were a (really nice, sociable) young Australian couple. They were leveraged to the hilt with a rental portfolio of 15 properties I think one of our flatmates said. And still looking for more. I always did wonder whether they liquidated in time...
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