Crisis or challenge? The issues

Confronting the Auckland housing market have been dominating public discourse for weeks now. Yet the latest data indicates the SuperCity market is currently taking it easy.

Regional markets stand in stark contrast. Many just keep getting stronger as supply and demand pressures grow. Experts say it is no longer the big centres of Auckland and

Christchurch that are driving the country’s housing market – it is certain regional centres. Across the board, May’s data shows the country’s housing market is trucking upwards solidly. Trade Me Property recorded a small 0.1% drop in the average asking price as compared to April, but rising prices dominated otherwise.

Realestate.co.nz’s May statistics show the national average asking price hit an all-time high of $570,971 which was a 7.2% year-on-year increase. At the same time, new stock on the national market dropped 7.1% on April, while the long term average also fell.

Sellers’ Market

In May national stock sank to an all-time low, Realestate.co.nz spokeswoman Vanessa Taylor says. “It’s a classic supply and demand situation and it’s definitely a sellers’ market.”

Heightened real estate activity was evident across the North and South Islands. “The Central Otago/Lakes region and Nelson in the South are notable stand-outs, while Wellington, Waikato and Auckland in the North continue to feature strongly,” Taylor says.

The May data from REINZ backs this up. It shows the national median price broke the $500,000 mark for the first time, to hit $506,000 in May. This was an increase of 3% on April and a year-on-year increase of 10%.

But REINZ spokesman Bryan Thomson says regional markets, as opposed to Auckland, drove the national median price up, with five reaching new record highs in median price.

Growth in regional activity is now exceeding the influence of Auckland on national statistics, he says. “This is shown in the fact that Auckland’s median price is rising slower than the national median price at 7.5% it is now well below the national median price increase rate of 10%.”

Demand Drivers

While most of the data shows Auckland’s market slowed in May, QV’s data was slightly out of step. It recorded strong value growth in housing markets around the country – including Auckland.

Residential values nationwide increased by 3.9% over the past three months and by 12.4% year-on-year, leaving the average national value at $577,829. This is 39.5% above the 2007 market peak. Once adjusted for inflation, the annual increase dropped to 11.9%, which leaves values 18.9% higher than in 2007.

QV national spokeswoman Andrea Rush says values are continuing to accelerate in many parts of the country, with Tauranga, Hamilton, Wellington, Dunedin and Queenstown values doing particularly well.

$1 Million Average

Going against the grain, QV’s May data suggests a resurgent Auckland market. It shows average property values increased by 3.3% over the past three months and by 15.4% year-on-year, leaving the average Auckland value at $955,793. This is 74.9% above the 2007 market peak. Once adjusted for inflation, the annual increase dropped to 14.9%, which leaves values 49.1% higher than in 2007.

QV’s Auckland values James Wilson says buoyant market conditions are leading to rapidly rising values across the city, verifiable because agents are reporting a shortage of listings and well-presented good quality stock is moving increasingly quickly.

“We are also seeing numerous examples of properties transacting within short timeframes by property speculators,” Wilson says. “Vacant sections within new developments are extremely popular, with the on-selling of vacant sites purchased off plans providing strong capital gains.”

Rush says that if Auckland values continue to rise at the same rate during 2016, then by this time next year the average value will top $1 million.

Stabilising Prices

Signs that Auckland’s market rebound might be flattening out, however, are characterised

REINZ’s May data. It shows the SuperCity’s median price dropped by 1% (or 0.6% once seasonally adjusted) to $805,000 in May, from $812,000 in April. While Auckland’s median price rose by 8% year-on-year, the rate of its annual price growth has slowed.

Once seasonally adjusted, the number of sales in the Auckland region fell by 2% on April. Auckland was also the only region in the country where days to sell increased and, at the same time, its share of auction transactions dropped significantly in May (to 65% from 77% in April).

Auckland’s prices have lost their upward momentum, Barfoot & Thompson managing director Peter Thompson says. His company’s data shows it has been five months of trading since the all-time high average price of $876,075 was set.

The city’s average sales price has remained static for two months, he says. “The average price in May was $874,623 which is up only 2.4% compared with that for the previous three months. Further, the year-on-year increase for May was up only 6.4%.

This is well down on the 12% increase we saw in the 2015 calendar year.” In May, Barfoot & Thompson’s media sales price also fell by 1.3% to $809,500 – although this was up 3.1% on the average for the previous three months and up 7.9% year-on-year. Thompson says the stabilisation of prices is not a result of lack of buyers, as sales numbers were up on April and up 31.4% on the average for the previous three months.

Going Gangbusters

In contrast to Auckland, as noted, a number of regional markets around the country are booming with double-digit price growth and busy sales activity.

According to Realestate.co.nz, May’s star was the Central Otago/Lakes region, which hit an average asking price of $819,778. The region topped New Zealand in terms of year-on-year average asking price growth at 17.2%. It also recorded the largest drop in new property listings down 32.9% year-on-year.

QV’s data highlighted the Hamilton and Tauranga markets as having particularly strong value growth. Hamilton’s average values were up 4.9% over the past three months and 26.2% year-on-year, leaving them at $478,323. Tauranga’s average values were up 4.9% over the past three months and 23.1% year-on-year, leaving them at $591,942.

Trade Me Property and REINZ both pointed to the Bay of Plenty as the leader of the pack. Head of Trade Me Property Nigel Jeffries says the average asking price in the Bay of Plenty hit $533,600 in May. Not only has it seen a 23.4% year-on-year increase in average asking price, it has also seen a 46% increase over the past five years.

The Bay of Plenty has seen “rocketfuelled growth” for the past year as a flow-on effect of Auckland’s super-charged property market, he says. “The region’s price has increased by $101,250 over the past 12 months, which surpasses the $95,100 lift in Auckland’s average asking price over the same period. It is fast becoming the new kid on the block, challenging Auckland in terms of growth.”

Red Hot

Inevitably, the housing market continues to draw the attention of economists. ASB economist Kim Mundy says Auckland is no longer the sole driving force of New Zealand’s house price growth, with the regions continuing to pick-up pace.

“New Zealand’s housing market activity is increasing strongly on the back of robust demand,” Mundy says. “Outside of Auckland, low interest rates and displaced Auckland demand is responsible for driving demand.” Westpac chief economist Dominick Stephens says the country’s house market is “red hot” and a wide tableau of indicators indicate house prices will continue to rise rapidly over the coming months.

This means Westpac has revised its house price forecast for the year from 10.5% to 14.2%. “That includes an allowance for more restrictions on mortgage lending from the Reserve Bank, which may slow the market for a time, but are unlikely to constitute a circuit-breaker,” Stephens says.