Economic research company, Strategic Risk Analysis Ltd, has just released an analysis of the housing market and it claims that reports of Auckland’s price rises and falls are misleading.
In the “Raving”, managing director Rodney Dickens said it is not changes in actual prices which are the main driver behind Auckland house price movements.
A quick look at the past behaviour of the Auckland median price shows the fall between September 2015 and January 2016 is no different to past temporary tumbles that have been followed by spikes, he said.
“Spikes and tumbles in the reported Auckland median dwelling price reflect normal behaviour and will be the result of changes in the composition of sales between higher-priced and lower-priced properties.”
Further, the price changes were also not related to the tax and LVR measures introduced late last year in a bid to calm the Auckland market.
In Dickens’ view, the behaviour of the number of sales in recent months more accurately reflects the impact of the policy changes.
He said the number of sales in Auckland has been bouncing around in recent months after falling sharply following the policy changes, with sales in March 2016 still 21% below the September 2015 level.
“There are reasons to expect sales to improve in Auckland and the upper North Island over the next several months but, for now, the policy changes are still having a significant negative impact on demand in these two areas.”
Assessment of house price prospects comes down to comprehensive analysis of the demand-supply balance of the market in question, Dickens said.
“The Auckland market has gone from an extremely strong demand-supply balance to a balance that is still supportive of house prices increasing at somewhat above a 10% annual rate in the near-term.”
However, he believes that Wellington currently has one of the most interesting housing markets in the country.
This is based on an improving demand-supply balance and prices being cheap on a relative historical basis.
Also, Wellington is poised to benefit from stronger economic growth than predicted by Treasury and economic forecasters when the government goes from purse tightening to increasing spending.
Dickens said the housing booms which have been fuelling local economies and job creation in upper North Island regions should spread further afield this year, especially to Wellington.
This will help fuel stronger consumer spending growth than bank economists are predicting and, in turn, the GST tax take.
Combine this with investors searching for better value and greater capital gain prospects than are available in the Auckland market – and the Wellington housing market will benefit.
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