Signs point up: ANZ

They have released their latest Property Focus, which says there is a clear divide between what is happening in Auckland and the situation in the rest of New Zealand.

Despite the Reserve Bank backing off from hiking interest rates, the Auckland property market seemed to be experiencing a “third wind”, the economists, said, with the city’s annual house price inflation rising to 11.6% in January, from 9.8% year-on-year in December.

The report said strengthening residential construction activity was likely to help alleviate dwelling shortages and bring the market to balance, but this was still a way off.

Of the 10 gauges the report uses to indicate the future direction of house prices, only migration is pointing purely up.

None is pointing completely down. Affordability, liquidity, globalisation, median rent, consents and sales and serviceability were pointing to flat or dropping prices.

Factors keeping prices flat or edging up included interest rates, supply/demand and housing supply.

Cuts to mortgage rates were helping to reduce pressure on affordability, although house prices were still going up, the report said.

Servicing costs as a proportion of income are still high although not as high as they might be due to low rates.

The supply-demand balance was becoming an Auckland vs New Zealand issue, the report said. There is much tighter inventory in Auckland than in other parts of the country.

Property investors were experiencing falling yields as rental increases outpaced inflation but did not keep up with house price inflation.

On balance, the report said the market was going up. “It keeps chugging along, much to the RBNZ’s and first-home buyer’s frustration.”