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Auckland house prices surge to new record, rest of the country flat - REINZ

Auckland house prices surge to new record, rest of the country flat - REINZ

There is no sign of housing prices cooling in Auckland, where the median dwelling price rose to a new all time high of $755,000 in June, compared to $749,000 in May and $600,000 in June last year, according to the Real Estate Institute of New Zealand.

That means the median selling price in the Auckland region has risen by $155,000 (25.8%) in the last year or nearly $3000 a week.

However around the rest of the country prices were largely flat last month, with the median price for all parts of the country excluding Auckland coming in at $340,000 in June, a decline of $9000 compared with May and unchanged since June last year.

In Waikato/Bay of Plenty the median price was $346,750 in June compared with $350,000 in May and $336,000 in June last year.

In Wellington the median was $390,000 in June compared with $405,550 in May and $385,000 in June last year.

In Christchurch the median was $431,650 in June compared with $422,000 in May and $430,000 In June last year.

The number of homes sold took a dip in June, as is usual during the winter months, with 7426 homes selling around the country, which was down 7% compared to May but up a whopping 29.2% compared with June last year.

In Auckland 2808 homes were sold in June compared with 3151 in May and 2329 in June last year.

"Prices are continuing to rise within Auckland and the inventory situation is very tight, with less than 10 weeks stock available,  REINZ chief executive Colleen Milne said.

"There is increasing evidence that Aucklanders are looking out of the region for properties, both as owner-occupiers and for investment properties."

Within the Auckland region, the most expensive place to buy a home is the North Shore, where the median price was $940,000 in June, followed by Central Auckland (within the boundaries of the former Auckland City Council) $859,250, Waitakere $700,000, Rodney $685,000, Manukau $675,000, and Outer Auckland $580,000.

To read the REINZ's full report for June, with sales analysis for all regions, click on the following link:

PDF iconREINZ Residential Regional Data - June 2015.pdf

See the interactive charts below, which track movements in the median selling prices of all regions of the country.

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so what we are seeing is everywhere but auckland starting to cool as prices come back to the relativety of wages etc.
Auckland is clearly fueled by somthing else quick national build 100000 houses and see what happens this so looks like spain and ireland its not funny

All the bubbles have 2 things in common:
1- The feeling that prices will continue growing
2 - The money to materialize that feeling

Does anybody have the correlation between bank loans and houses purchased's prices?

I see some possible options here:
1-Either banks are over-leveraged. Bad thing as the financial system would collapse when the bubble bursts.
2-Money comes from savings. I don't think so..
3-Money comes from overseas. Good thing for New Zealand as long as first home buyers are kept away from an overheated market (not to hurt the financial system and especially themselves) and deposit remains high. The bad thing is that many local fools believe they will be richer buying and selling houses to each other. If only overseas' money were at risk..

I guess it's a mix between 1 and 2.
I would do a few things:

1-hold banks liable for their bad loans from now on. For example by allowing the mortgage to be cancelled with the house like in USA. If someone cannot pay the mortgage that person will handle the keys to the bank and the debt would be cancelled despite being the current market value much lower than the mortgage total. That way we would see how many banks are willing to take the risk of fuelling further this market..

2-increase cash reserve ratio. Prevent over-leveraged banks. When the bubble bursts only those who decided to take the risk should suffer the consequences. Not savers, not businesses, not productive economy,

3-increase required deposit. People are not often rational. Sometimes they can make the biggest mistake of their lives just because they think it's the normal thing to do or because the society encourages an irrational behaviour. In exchange, to protect our right for shelter, government should subsidize rents in case short supply is increasing prices to keep it always at pace with median salaries. After all there is not such a thing as the right to property ownership but there is a basic human right to shelter.

4-introduce taxes on speculation. It doesn't matter whether by itself CGT or similar prevents speculation. The important thing is to tax speculation and gains in the same way workers pay taxes on their incomes and consumers on their goods.

Bring these 4 things on and I don't care what speculators or "investors" do. I would vote for anybody suggesting it. And then let the market truly reward with higher profit higher risk.. but not at the expenses of everybody.

Subsidising rents is just subsidising "investors".

As long as investors pay the fair tax I wouldn't mind.
They can decide whether to invest in a low yield rental market or whether invest their money in the productive economy, which is what government should encourage.

What we mind is that it stops that risk that you mentioned, so there is no reason investors should be careful, or worried about bubbles. In fact it's a bit like buying a ticket in investor lottery, if the buibble goes pop, then government extorted tax-payer flies out to fix the problems. this cannot be a good signial to send to the market .

such rent subidise hasn't worked well in the past. If it has to happen then so be it, but it means people are spending higher than they earn so what's holding up the economy? and does it really help the families or just the capital investors (for the likes of WFF) and price settors and allow the market to push into the danger zone. that's more the free money, than bank loans, because this free money services a much larger loan.

only if market prices are high compared to salaries or due to supply. That's what I suggested.

My rent is 30% our household income. I don't need my rent to be subsidized as that's a reasonable price.

But if rents are 40% or 50% the household income then there is a problem. Either jobs are not quality ones, there is a shortage of rental properties or regulations to encourage renting are not working. In any case government should be responsible directly or indirectly and subsidizing rents would be a solution until the root problem gets fixed.

Right now Auckland's rents are affordable, by the way. That's why yields are so low for "investors". Rents are linked to productive economy and increase and decrease accordingly as no tenant can speculate with rents.

My point is: houses are expensive? don't buy and let's make sure only gamblers suffer consequences if something goes wrong.
But if you cannot afford to rent then the problem becomes a government problem and something has to be done as everybody has the right to shelter. That's not the case right now anyway.

From a metrics point of view, your rent should top off around 20% of net income. anything more cuts into what you can spend back into the economy as consumables, which is required to keep economic engines fueled. But, there is no reason tht 10% can't be because that's your chosen consumable (eg big house, location, aspect etc.)

And yes when it gets over 40 - 50% then yes the economic machine is running far too lean, and that's not good.

But on the quality job thing.
Just what is a quality job? Human need vs human want?
Is picking cabbages less quality job if it gives health and family, then filling out fancy reports that barely get read and then discarded Which adds more value to humanity or Earth overall?

I disagree that Auckland's rents are affordable - yes they can be paid by those working there, but it is often a rate that is too high for economic good, and given the resource drain on the rest of the country to keep Auckland going and it's fat salaries (and the capital drain which in inflicits on the rest of the counry) it's not affordable.

Agree with your conclusion 100%

I also disagree about the "right to shelter". What concerns me though, is that government and many others refuse to let a market force OR social group fix the problem - so buy forcing people into housing they can't afford the problem magically disappears. If those people have the minimal shelter they can afford it would look bad...and that would show up in the reports. That's why I oppose _policies_ that overlook economic process, models, and realities - to try and reinforce a Social Heirarchy built on Tribal Privilege which doesn't exist or apply below the top 20% (ie to those who arein the merchantile* class, (First and Second estates) where income is given to them and extracted by law)

* merchantile as in Spain, Portugual, Britain at the time of settling the Americas. They would raid each others reserves and demand tribute from their colonies - those taxes making for VERY favourable living for those who received the income.

the banks themselves are doing that in australia, westpac the largest lender to PI has put a LVR of 20 % on as well as APRA has changed tier 1 to require more held against property

Don't forget that the Govt. allowed people access to their Kiwi saver money for a house deposit.

Prior you were only allowed access in a financial emergency. Which the Govt by default admitted the housing situation was by allowing access.

Once you have used the 'rainy day' money on a 'fine day' purchase then there is only debt and other peoples money left, and I think we have about used that up as well.

"Don't forget that the Govt. allowed people access to their Kiwi saver money for a house deposit."

some people.

"Govt should subsidize rents" don't you mean govt should provide welfare for investors, even ones that don't live here.

I'm always confused why REINZ never use their index data anymore and instead report changes in median prices? They dont account for the change in mix/type of properties being sold.

What % of houses sold in auckland are brand new for example? A lot more than any other region bar chch.

Where are investors buying lower priced rentals? Prehaps in regions and not in auckland.

They've got the index data, why not report it?

Given median prices don't mean anything, the only useful indicators from REINZ data these days is volumes sold, for which there is 3 clear standout regions (from graphs in attached pdf). Northland, BOP, and Manawatu/Wanganui have all seen a noticible jump above trend line for volumes sold, Auckland bang on trend, which is more in line with what people are observing out there with Aucklanders taking a lot more interest in the secondary cities of the North Island.

Not like Spain and Ireland in Auckland. You do not see ghost towns in Auckland. Spain especially is full of them and in Ireland every second Mick brought a holiday home as an investment.
Supply and demand has a lot to do with it also.

I agree. The scenarios are different.
Spain, during the bubble, was building 800,000 properties a year. More than France and Germany together. It was an oversupply issue fuelled by European banks (mainly German and French banks). We all saw what happened to banks in Spain and we all see how pushy Germany and France are against debtors in south Europe.

Ireland also had an oversupply problem.

Auckland is different. There is no oversupply. Where is the money fuelling Auckland bubble coming from? What percentage is coming from overseas and what percentage is being generated by banks as a BAD LOAN that we all will regret?

PS: Spain, with 43 million pop. still has 2 million houses in stock. In some cities prices have gone down 60-70%. Public bailout of banks meant that house prices didn't collapse further as they should have and eventually will.
Ireland destroyed part of its stock.

you are assuming all the houses brought in auckland have someone living in them, But as per anadoctal evidence a big proporation dont But are being held empty for sale later for profit
what happens when all the owners rush for the door at once
we can also assume that their is massive buying from one country and that countries sharemarket is in trouble and will tank big time so that loans get called in and the banks themselves get in trouble

There is a housing shortage in Ireland at the moment and prices are rising. The whole oversupply thing doesn't stack up. There was inward massive immigration soaking up any capacity and the "Micks" had to buy their investment properties in Croatia and other far-flung Eurotrash haunts.

Once all the Polish builders went home, there may have been a few spare houses but there was never oversupply. Just a lot of building and a lot of immigration. So now, a few years on they are building again.

Whatever, there isn't oversupply in Auckland - that is agreed. But the main driver in the market is speculators and investors and cheap money. Building 50,000 houses would only encourage them more! 75% would be sold off plan, 10% of those would be left empty!

If the market turns and the speculators disappear I will bet you won't hear anyone complaining about lack of supply. The market will fix itself, immigrants will stop coming, a few kiwis will bugger off, boomers will sell off a couple of places. There might even be oversupply!

Irish bank economist tells how vested interests suppressed advice on how to prevent property bubble.

Vested interests, lack of political will, delayed supply response, speculative mania, building response not based on actual need, mismatch between supply and demand, shortages in some areas, surpluses in other areas..... there are some common themes.

Ireland had massive immigration who came to build houses, so it was self fueled, i.e demand from immigrants meant development opportunities, meant more jobs, meant more immigrants.. And then it all came un-done with the developments stopping, so immigrants left, so ended up in oversupply.

Auckland could still easily pull this off if they start building like crazy and if the building activity becomes the dominant economic driver for the region (chch is a mini example of this past few years).

Bulk Cash Smuggling is alive and well so the surges to new highs will continue!!

Looks like life's good in landlord land.

until immigration turns then what you going to fill your houses with cabbages

Why the sudden change of heart at the Herald? They have been cheerleaders of foreign investment for so long - now another great story:

Keep it coming, you might actually start to win some subscribers back with old fashioned investigative journalism.

its like the little boy has taken his finger out of the leaky dike and now the stories are coming thick and fast, they could only hide the facts for so long before anadoctal evidence becomes factual It makes me wonder how long this rort has gone back now
It is the biggest public turnout of National's financial backers since donation rules were tightened in electoral laws in 2007, clamping down on anonymous donations and lowering disclosure limits.
They included a $20,000 donation from the director of Barfoot & Thompson real estate,

one pissed off boss seeing his gravey train about to wreck

not too hard to guess their subscriber base for their english language publication is rapidly shrinking - and they've been doing that to themselves by supporting increased numbers of non-english speaking people

This is getting ridiculous. Peter Thompson is claiming "We know there's been a large portion of Asians buying property but there's no way to tell if they're one of three categories: NZ born, foreign-born NZ citizens or foreign-born foreign citizens."
The agent will always have an address for their buyers, their bankers and solicitor. This latest little tantrum would indicate a worried man.
And as for the Chinese buyer claiming that Kiwis were lazy and spent all their money on beer, well excuse me but isn't that racist Susan Devoy. Is that the sort of attitude we want from our property owners/would be immigrants/slum landlords?

So, who is interested for prices to come down? Government / City Council, Banks or Insurance companies? Or maybe all of them?

investment bankers are now calling for interest rate rises to pop asset bubbles before they get to big