House Prices

Housing market perkier than expected as it turns around

The latest REINZ property market figures shows a convincing turnaround in fortunes.

Wednesday, September 13th 2023

Westpac senior economist Satish Ranchhod says the REINZ update has reinforced the bank’s view the housing market has found a base, and if anything is firming faster than it anticipated.

House sales rose 5% last month and are up 9% on this time last year. “While the level of sales remains low, the market has clearly turned since the start of this year,” he says.

However, trends have been mixed across the country. The rise in sales has been more pronounced in areas like Auckland and Canterbury.

Across the regions, Northland (4.5%), Auckland (18.2%), Waikato (16.2%), Manawatu-Wanganui (8.6%), Tasman (8.0%), Nelson (12.3%), Marlborough (38.1%), Canterbury (24.9%) and Southland (4.2%) all saw increases in sales counts year-on-year.

“Local agents are reporting that, as new listing numbers continue to decrease, the demand for entry-level property is holding and fairly strong, and properties are starting to move quicker,” says Baird.

In contrast, sales in Wellington have remained sluggish. Sales were down 16.9 per cent compared to July and down 2.5% compared to August last year.

On the prices front, the sharp fall over the past year has been arrested. Nationally, last month’s median sale price dropped 4.1 per cent year-on-year from $800,000 to $767,000.

Auckland and Wellington had a rise in their medium prices. Auckland tipped over into the $1 million territory, rising to $1,010,000, an increase of 2 per cent month-on-month, but a drop of 8.2 per cent year-on-year. Wellington had month-on-month increases with the median sale price up 2.3 per cent from $733,000 to $750,000.

The REINZ house price index rose 0.8 per cent in August, similar to the pace seen in recent months.

“This firming in house price growth is notable as it comes at the same time as mortgage rates have been pushing higher,” Ranchhod says.

In addition, investors are still largely absent from the market as they await the outcome of October’s election.

Given those conditions, Ranchhod says the lift in prices in recent months points to confidence returning to the housing market.

That’s consistent with a six day drop in the time it takes to sell a house and listings while still at lower levels compared to August last year, rising 20.9 per cent month-on-month, suggesting seller confidence is returning and a more normal spring ahead for the property market.

He says the housing market has clearly found a base and, if anything, it is looking a bit perkier than Westpac been expecting.

“With interest rates at relatively high levels, we’ve been expecting that house price growth will remain modest over the next few months, before taking a step higher next year. However, the gains seen over the past few months suggest that the market may be heating up even sooner than we had expected.”

Westpac is forecasting house prices will rise by close to 8% next year. “The firm REINZ housing market report, along with stronger than expected migration figures gives us confidence in forecasting that acceleration, Ranchhod says. 

“October’s election remains an important wild card for the housing market. Right of centre parties have signalled that they will ease the regulations affecting property investors, such as restrictions on interest deductibility.” He says an easing of those policies will reinforce the pick-up in house prices.

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