There’s been a sea change in the housing market. Gone are the grey days of flatlining sales volumes and declining prices.

The vibe these days is very different. Market activity has picked up, confidence is rising and real estate agents are busy. In the most recent data, there’s little divergence from the general theme: the market is rebounding and Auckland appears to be starting a new growth cycle. Some commentators expect the growth to slow as the year goes on, while others are not so sure. At this stage only the potential impact of coronavirus could throw a spanner in the works.

But there’s two sides to every coin – and as the market heats up again, so too do issues around affordability. Given the country’s ongoing housing crisis, it could be affordability constraints that reign in the market. Right now though, the outlook is all about those good vibrations.

Supply Shortage

In many ways, the big story in January’s data was not price growth or improved sales activity, it was listings. While more properties are coming on to the market there’s still a nationwide shortage with the number of homes for sale significantly down.

According to Realestate.co.nz’s latest data, the total number of homes available for sale (19,488 homes) in January 2020 had fallen by 21.7% from the same time last year. Not one region in New Zealand saw an increase in the number of homes for sale in January when compared to the same month last year. Wairarapa and Taranaki saw the biggest drops in the number of homes for sale, seeing decreases of 49.3% and 46.9% respectively when compared to

January 2019. In the Bay of Plenty, total homes available for sale hit an all-time low for the second month in a row, dropping 20.6% since January 2019.

In the Auckland region, the total number of homes available for sale in January was down by 22.2% on the same time last year. New listings were also down on last year with a 5.6% decrease in new properties entering the market in January 2020 than in January 2019. Barfoot & Thompson’s January data provides further evidence that the Auckland market remains tight when it comes to stock. The agency’s managing director, Peter Thompson, says that at month’s end they had 3,537 properties on their books, down 18.4% on January last year. “This number of listings at the end of January is the lowest they have been at the start of a year in four years.”

At the time of going to print, the January data from REINZ was not yet out. But its most recent data has the total number of properties available for sale nationally down by 24.5% to 18,230 in December 2019, as compared to 24,158 in December 2018. That’s a decrease of 5,928 properties compared to 12 months ago and the lowest level of inventory since records began.

Prices Keep Heading Up

What this ongoing shortage of stock is doing is keeping a floor under prices around much of the country. And, as market activity picks up, that’s contributing to price increases.

Realestate.co.nz puts the national average asking price at $710,393 in January 2020. While this was only a small increase on December 2019’s high of $703,780, the national average asking price only moved over the $700,000 mark for the first time at the end of 2019.

On top of the rise in the national average, Realestate.co.nz has four regions hitting all-time asking price highs in January. They were Otago ($497,127), Southland ($386,210), Marlborough ($581,106) and the Central North Island ($536,704). It also has Auckland’s average asking price up marginally – by 1.3% to $952,861 - in January, as compared to December 2019. Meanwhile, Barfoot & Thompson has both the average and median prices in Auckland noticeably up on those for January last year.

The agency’s average price for the month at $951,631 was in line with prices for the past three months, but it was 2.6% ahead of last January’s average price of $927,181. Growth was even stronger when it came to the region’s median price of $885,000 in January.

That’s an increase of 2.3% on December and of 6.9% on January 2019’s median price of $827,500. Thompson says that buyers were active across all price segments and prepared to pay near record prices. “January’s trading confirmed the signs seen in November and December trading, which pointed to the Auckland housing market entering a new growth cycle.”

QV’s latest House Price Index serves to confirm the market recovery just keeps stepping up the pace. Its data reveals that all sixteen of the major cities they monitor saw quarterly value growth in January.

Not only is this the second month in a row QV has recorded this, but it shows the average national value has grown strongly too. It was up by 4.4% year-on-year to and is now $714,747. This represents an increase of 2.5% over the past quarter.

Of the main centres, Dunedin continues to out-perform with quarterly value growth of 8.4% and annual value growth of 20.8%, leaving the city’s average value at $527,101. It was followed by Hamilton and Wellington with quarterly growth of 4.1% (to $616,316) and 3.6% (to $756,076) respectively, while the Wellington region also saw 9.0% annual value growth.

The data also has the formerly dormant Auckland market continuing to rally, with the average value in the Auckland region now sitting at $1,049,383. That’s an increase of 1.7% over the last quarter and it’s contributed to the first positive year-on-year growth (of 0.3%) for Auckland since late 2018.

QV general manager David Nagel says demand from right across the spectrum of buyers, coupled with the shortage of listings has meant values keep rising.

“New listings started to increase toward the end of January around most of the country. But overall listings are reported to be down on the same time last year, which suggests the current trend of steady price growth is likely to continue in the short term.”

Market Momentum

This is all providing a positive buzz to the market. Sales volumes may not have returned to the levels seen a couple of years ago, but they have improved. REINZ’s most recent data had sales at their highest in a December for three years. In a similar vein, Barfoot &

Thompson recorded the highest number of sales in a January for four years, up 3.8% on January last year. QV’s Nagel says that while the volume of transactions was low in January, there’s still plenty of interest from potential buyers looking at the limited stock on offer.

And, although REINZ’s January data was not out at print time, its chief executive, Bindi Norwell, told us there’s visibly a lot more confidence in the market.

“We’ve been seeing regional growth for quite a while but Auckland has been looking more positive in terms of price growth and sales volumes for a few months now. That could be a good indicator of a market rebound.”

Auctions are on the rise again and days to sell are going down, she says.n“It all shows lots more momentum in the market. We expect that momentum to continue for a while, given the low interest rates and lots of support from government infrastructure plans, strong employment and booming construction.

“Unless there’s a major economic impact from coronavirus, it looks very much the situation won’t change in terms of growth and market confidence. So, going forward this year, the outlook is positive.”

It’s worth taking affordability issues into account too, Norwell adds. “Prices, especially in Auckland, have been stable for some time. But as prices start to grow, that imbalance with wage growth might come to the fore again.”

For Westpac chief executive Dominick Stephens, the strong housing market rebound is likely to be the key reason for the Reserve Bank’s recently upgraded OCR outlook.

However, they believe that the housing market will heat up more than the Reserve Bank expects. “The Reserve Bank is forecasting peak of 7.7% house price growth, but it continues to forecast an unrealistically rapid cooling in the market,” he says.

“That is not going to happen as long as mortgage rates remain low. We expect a slightly higher peak rate of house price inflation, and a longer-lasting period of rising prices.”