The number of home sales fell 4.4 percent in August from July, while soaring on an annual basis, as the national median price steadied on a monthly reading, according to the latest figures from the Real Estate Institute of New Zealand. Auckland’s median price increased 0.7 percent in August to $740,000, and has surged 21 percent in the year.
Some 7,766 homes sold in August, fewer than a month earlier but some 43 percent more than in the same month last year, REINZ said. That includes the highest number of sales for Auckland and Waikato/Bay of Plenty since August 2003.
Today’s REINZ figures show the national median price was steady last month at $465,000 compared to July, while showing an annual gain of 11 percent. Excluding the impact of Auckland, the national median housing price fell 1 percent to $348,500 in August, but was up 2.5 percent on an annual reading.
Demand for housing in Auckland is now overflowing into other regions, as investors wait for LVR restrictions to come into effect from Nov. 1, REINZ chief executive Colleen Milne said.
“The presence of Auckland buyers in other regions is also becoming more noticeable with a surge in Auckland investors buying in Dunedin and continued strong demand for properties in the Waikato and Bay of Plenty from Auckland buyers,” Milne said. “REINZ members report the pending Reserve Bank LVR restrictions in Auckland are driving some of this demand, as are low (and falling) interest rates. While there may be some stability coming into prices in the Auckland market, there is no shortage of demand from either first home buyers or investors across the region.”
Two regions increaseD sales volumes, compared to July. Otago volumes rose 24 percent, while Manawatu/Wanganui increased 10 percent. On an annual reading, all regions lifted sales volumes, with Northland surging 97 percent, while Waikato/Bay of Plenty increased 77 percent.
The median price in Waikato/Bay of Plenty fell 1.2 percent to $353,000 in the month, but was up 6.5 percent on an annual reading.
Wellington’s median price rose 1.7 percent to $402,550 in August, and was up 1.3 percent on the year. Sales volumes in the capital declined 3.6 percent in the month, but were up 29 percent on the year. Canterbury/Westland recorded a monthly 0.7 percent drop in its median price to $412,000, for a 3 percent annual gain. Sales volume slipped 6.3 percent in August, but was up 16.3 percent compared to a year earlier.
Just 41 percent of properties sold in August were below $400,000, compared to 46 percent a year earlier, while the $1 million-plus bracket accounted for 11 percent of turnover, up from 6.7 percent in August 2014.
The proportion of houses sold at auction increased to 25 percent, up from 23 percent a month earlier, and 17 percent in 2014. In Auckland 77 percent of houses were sold at auction, compared to 14 percent in Waikato/Bay of Plenty, or 1.6 percent sold in Wellington.
The Auckland property market has been a persistent concern for policymakers as record inbound migration swells the population in the country’s biggest city. A lack of building activity in the city, after the collapse of the finance company loans sector last decade, left a shortfall in housing supply when buyers re-emerged after the global financial crisis and local recession. That’s pushed up prices to high levels relative to household incomes, something the Reserve Bank sees as a risk to the wider financial system in the event of a sharp downturn.
With average Auckland house prices costing approximately nine times’ average earnings, Auckland was now one of the “dozen most expensive cities in the world,” Reserve Bank of New Zealand governor Graeme Wheeler said in a press conference after this morning’s release of the bank’s latest monetary policy statement.
To soothe the property market, the central bank imposed restrictions on high loan-to-value ratio mortgage lending in late 2013. Further limitations on lending to Auckland property investors will bite from November, with banks facing pressure from the Reserve Bank to implement the restrictions informally and early.
“The cut in the Official Cash Rate by the Reserve Bank this week by a further quarter percent is good news for borrowers, although there has been minimal increase in house prices outside of Auckland despite the recent cuts in interest rates,” said Milne. “The impact of interest rate reductions within Auckland is hard to measure given the overriding supply and demand factors across the city.”
Wheeler cut the OCR for a third time this year this morning, lowering it 25 basis points to 2.75 percent, while noting the surge in Auckland’s housing market.
House prices in Auckland “continue to increase rapidly and are becoming more unsustainable,” Wheeler said today. It “will take some time” before a rise in residential construction in the country’s biggest city is able to correct the imbalance, he said.