Limited supply drives prices up further

Auckland, the Waikato/Bay of Plenty region, Northland and Manawatu/Wanganui all turned in new record median prices in REINZ’s July data.

The Waikato/Bay of Plenty’s market continued on its inexorable rise, with the median price up 2.7% on June to hit $450,000. This was a 26% year-on-year increase.

Northland’s median price was up 4.4% on June and 15.7% year-on-year to $376,000, while Manawatu/Wanganui’s was up 6.4% on June and 15.5% year-on-year to $265,000.

Auckland’s median price went up by just 0.5% from June to reach $825,000, but that was still a 12% year-on-year increase and a new high for the city.

The national median price was up 1% on June and 8.6% year-on-year to hit $505,000 – which was just $1,000 short of May 2016’s record median price.

However, despite rising prices around the country, sales volumes were down.

Nationally, there was a drop in sales of 7% on June and 10% on July 2015.

Sales in Auckland fell by 8% on June and by 20% on July 2015, while in the Waikato/Bay of Plenty region sales were down by 6% on June and by 14% on July 2015.

One major factor in both the rising prices and the drop in sales volumes is the shortage of properties for sale.

The REINZ data shows inventory continues to fall rapidly nationwide, with a 33% decline in properties available for sale year-on- year and six regions seeing a 40% plus drop in properties for sale.

Both Wellington and Hawke’s Bay have less than 10 weeks of supply available, while the Waikato/Bay of Plenty region has just 10 weeks supply.

In the Auckland region, inventory has increased slightly, but there is still below 10 weeks supply of properties for sale.

REINZ spokesperson Bryan Thomson said the ongoing price rises in many regions showed that demand is still firm.

But sales volumes remain below previous periods, as the continued shortage of supply impacts on buyers, who are struggling to find properties to buy, he said.

“We will watch market reaction with interest as the expected increase in listing numbers during the spring and summer selling period become available.”

The impact of the recently announced LVR rule changes, the approval or otherwise of the Auckland Unitary Plan and possible interest rate cuts on the market will also be interesting, he said.

ASB economist Kim Mundy said the REINZ data showed a lack of inventory across the country is keeping upward pressure on New Zealand house prices.

A number of region’s median house prices hit fresh record highs while the median number of days taken to sell a house remains near record lows, she said.

“Once again, sales activity slowed in July, but this is likely to reflect the limited availability of houses to buy, more than a lack of demand.

“Indeed, ongoing and widespread price pressures suggest that demand continues to well-outpace supply around the country.”

Westpac acting chief economist Michael Gordon said the downturn in sales might reflect a lack of opportunities, as data shows listings have been trending lower for some time.

“However, this begs the question of why owners are keeping their properties off the market, given the current strength of sale prices.

“The implication is that they are holding on in anticipation of further capital gains.”

Both Mundy and Gordon said it was too early to see any impact from the Reserve Bank’s new LVR restrictions, but they would expect housing market activity to slow in August.