REINZ says annual house price inflation surged to 9.2% in past month from 8.2%; national median rose $25k in month to new record $440k

REINZ says annual house price inflation surged to 9.2% in past month from 8.2%; national median rose $25k in month to new record $440k

House price inflation rose to an annual rate of 9.2% in March, up from just 8.2% in February, while the national median price stormed to a new record high of $440,000, up $25,000 in just a month, according to the Real Estate Institute.

However, sales volumes nationally were well down on the volumes reported on the same time a year ago, while inflation in the hot and volatile Auckland market eased to 12.1% after spiking to 16.9% in February.

The figures run directly counter to those produced earlier this week by government valuer Quotable Value.

Auckland and Canterbury/Westland both recorded new high median prices of $637,000  (up 13.3% on a year ago) and $401,000 (up 11.7% on a year ago), respectively. See here for full regional breakdown.

It appears clear, however, the effects of the Reserve Bank's 'speed limits' on high loan-to-value lending, introduced in October, are still causing severe distortions in the market.

Banks have pulled their low deposit lending back to well below the 10% limit imposed by the RBNZ and would-be first home buyers have as a consequence largely retreated from the market.

The fact that far fewer numbers of houses are being sold in lower price brackets has been seriously throwing around both the average and median prices recorded.

Westpac chief economist Dominick Stephens said house sales remained low in the REINZ's latest housing market figures, and the number of days required to sell a house rose slightly, "indicating that the housing market remains subdued". 

But he said the price data emerging from the housing market was "a bit more mysterious". and was concerned that the REINZ's house price index "may have been skewed by the RBNZ's LVR restrictions".

"In the present circumstances, we prefer the Quotable Value monthly house price index as a more accurate measure of house prices. This has registered a sharp slowdown in house price inflation since the start of the year. The difficulty is that Quotable Value only records sales upon settlement, meaning the data is effectively two months behind the REINZ series.

"So the jury remains out on the trend in house prices. All we know for sure is that house price inflation was very slow two months ago."

This table below from REINZ of the composition of the latest month's house price sales compared with a year ago demonstrates the falling off of sales in the low end.

REINZ said while the total number of sales was down 10% compared with March 2013, the number of sales below $400,000 fell by 21.9%.  This followed a fall in sales below $400,000 of 17.7% between February 2014 and February 2013. REINZ concludes: "This may be indicative of fewer sales in the lower price brackets since the imposition of the LVR restrictions."

REINZ data shows there were 7315 unconditional residential sales in March, a 10% fall on the exceptionally high level of sales recorded for March 2013 (8,128), but a 19.4% increase from February. March is typically the busiest month of the year for real estate sales, however, on a seasonally adjusted basis the level of sales was about in line with sales in February, and down 9.5% compared to March 2013.

The latest house price inflation rate compares with 9.9% as recently as October and follows a recent sharp fall in the rate. Auckland's house price inflation was running at around 20% earlier last year.

The Reserve Bank said at the time it introduced the LVR limits last year that it expected house price inflation to peak at around 10% and most economists are picking an easing of price growth this year, with an expected rate of about 6.5% growth a popular pick - though forecaster Infometrics says house price inflation may dip as low as 2.4% this year before bouncing back strongly next year.

REINZ chief executive Helen O’Sullivan said the results for March further defined the divide between the drivers of the current residential market - Canterbury and Auckland - and the rest of the country.

"The low levels of stock held by agents in Canterbury and Auckland further suggests that there are not enough homes available to meet the demand from potential buyers," she said.

"There are also clear signs that the national sales volume trend is easing, continuing the trend that began last November. Only two of twelve regions, representing only 3.9% of total sales, showed an increase in sales volumes compared with March 2013.

"Despite the easing trend in volumes the median price continues to reach new highs, however, this may be due to the dominance of Auckland and Canterbury in the sales data and a noticeable shift in sales towards high value properties."

O'Sullivan said there appeared to be an increasing divergence between the regions that are seeing growth in their property markets; such as Auckland, Canterbury and Waikato/Bay of Plenty, and regions where the property market is far more subdued; such as Wellington, Hawkes Bay, Manawatu/Wanganui and Otago and Southland.

In many of the quieter regions the impact of LVR restrictions on first home buyers is still reported as strong.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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"By the end of
2014, Infometrics predicts that house price inflation will have eased to 2.4%pa.
T he biggest slowdown in house price inflation is likely to occur in Auckland, where
affordability issues suggest that the LV R restrictions should have the greatest effect.
However, in Christchurch, the influx of migrants into the city is exacerbating the
region’s shortage of housing, and Infometrics expects less of a drop-off in house
price growth to occur there.
 
Healthy economic and income growth throughout 2014 and 2015 will underpin
strong demand for housing next year and lead to another round of house price
inflation. Supply issues should ensure that house prices in Auckland and Canterbury
continue to rise relatively rapidly. A substantial 82% of respondents to the CPII
survey expect the Auckland housing market to still be undersupplied at the end of
this year, with just 9% expecting there to be an excess stock of housing by the end
of 2014.
T he strength of export incomes and their stimulatory effect on provincial economies
is likely to drive up property prices around the rest of the country as well.
Infometrics expects nationwide house price inflation to peak at 14%pa in 2015/16,
with higher interest rates eventually sufficient to restrict both the housing market
and more general economic activity. Some reversal in prices is possible in 2017 and
2018 as economic growth slows and the undersupply of housing in Auckland and
Canterbury is largely resolved." - infometrics

Housing could be an election issue , but those idiots in the Labour Party are going on and on and on about who Judith Collins had lunch with,  ignoring the real issues we face  .
Frankly , I dont know of anyone who cares about who Ms Collins had lunch with , but we all care about securing a roof over our heads .
Labour have lost the plot completely on this housing issue , which they could front foot with a sensible plan to alleviate the backlog.

Agree.  House prices have the potential to become a single issue vote - and they are blowing it.

It is way to early in the election season for detailed policy announcements, otherwise what you announce gets neutered by subsequent announcements from other parties

Agreed DH. National still intends to announce its housing accords for the rest of the country -Christchurch, Tauranga and Hamilton are important attractor markets that could take the heat off the Auckland housing market. National have left it too late to push against house prices rises before the election. But still Labour and the other parties will not announce specific policies until they see what National intend to do. If they announced something that got popular appeal too early they risk National cherry picking the best bits...

I am looking at a graph showing seasonally adjusted house volumes, and prices.  It's not pretty, and the downward trend is clear and well entrenched.

is it linkable, or able to be put on a dropbox?
 

I would call the overall trend as flat at this stage- because there has been so much variation recently, the next months figures can have a very strong determining effect, and you need to be more careful about long term trends from a few months.
That said, if you convert it to volumes per number of dwellings then the trend is clearly down.

Prices and volumes are not seasonally adjusted in those charts, my friend.

err, to clarify, the trend in volumes is clearly got a downward slope to it.  Seasonally adjusted prices are pretty flat, much to my surprise.  But if volumes continue to decline at their rate it's hard to envisage a scenario where seasonally adjusted prices don't start to fall (c. 6 months from now I would have thought).
 
March volumes were far below March 13 and inline exactly with march 2012.  And there is good commentary from westpac around the problem with stratified median prices at the moment with the bottom quartiles being cut out by the LVR which has moved the median up.  Prices are certainly no longer soaring on the ground - even if they appear to be on a year on year basis using REINZ data

"national median rose $25k in month to new record $440k"
Either house prices are at a new record high or they are not. 
Which is it?
If the median price is up another $25K for the month I can't see how doing Mickey-Duck figuring can intrepreted as a drop.
Any shortage of listings, will only make the matter worse while the LVR mish-mash will continue to drive up rents and prices.
Lesson: Never let academics run a free market- they haven't got a clue.

SOLD house prices are at a high because low to medium value properties are not selling.
 

Looks like all's still good in landlord land then.

Like the Gen-Y would say, YOLO (you only live once).  Soaring house price or not, if you miss the boat you will regret for the rest of your life!!

And Bill English and the rest of the Natl party absolutely refuse to take their blinkers off when it comes to non resident foreigners in the market and I am not just talking the top end of town, there are plenty of foreign landlords at the bottom end of town as well, picking up millions in welfrare via top ups, WFF and plain straight out benefits and what does the govt go after - they go after the little fry, the silly bennies who go overseas without getting all their i's dotted and their t's crossed.
This IS an election issue and best you sit up and take notice

The justification for high immigration is taking a hit:
Changing policy expectations
While useful, models do not capture all the effects policymakers expect from immigration.
When New Zealand moved to increase the numbers and skills of immigrants in the 1980s
and 1990s, policymakers appear to have considered that these changes had the potential
to have major beneficial impacts on the New Zealand economy, reinforcing the gains from
22
the other liberalising and deregulating economic reforms undertaken during that period.
At that time, it was considered that skills-focused inward migration could: improve growth
by bringing in better quality human capital and addressing skills shortages; improve
international connections and boost trade; help mitigate the effects of population ageing;
and have beneficial effects on fiscal balance. As well as “replacing” departing
New Zealanders and providing particular help with staffing public services (for example,
medical professionals), it was believed that migration flows could be managed so as to
avoid possible detrimental effects (such as congestion or poorer economic prospects) for
existing New Zealanders.
Since then, New Zealand has had substantial gross and net immigration, which has been
relatively skill-focused by international standards. However, New Zealand’s economic
performance has not been transformed. Growth in GDP per capita has been relatively
lacklustre, with no progress in closing income gaps with the rest of the advanced world,
and productivity performance has been poor. It may be that initial expectations about the
potential positive net benefits of immigration were too high.
Based on a large body of new research evidence and practical experience, the consensus
among policymakers now is that other factors are more important for per capita growth
23
and productivity than migration and population growth
. CGE modelling exercises for
Australia and New Zealand have been influential in reshaping expectations.

http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10
Migration and Macroeconomic
Performance in New Zealand:
Theory and Evidence
Julie Fry
New Zealand Treasury Working Paper 14/10
.....
That wont stop the NZIER from ii's monthly calls for a greater population.