Bulletproof house prices continue to climb

House prices appear impervious to anything thrown at them. According to the REINZ House Price Index (HPI), prices still managed to climb 2% in August.

However, the data was distorted by lockdown and will remain so while Auckland is in level four lockdown, says Kiwibank’s economics team.

Median prices for residential property across the country increased by 25.5% from $677,400 in August last year to a record $850,000 last month, REINZ data shows.

Four from 16 regions reached new record median prices and 25 districts reached new record median highs.

The median house price for New Zealand, excluding Auckland, increased by 22.8% from $570,000 in August last year to a new record of $700,000 last month.

Auckland again underpinned the strength of the housing market hitting a record median house price last month of $1.2 million – up 26.4% from $949,500 in August last year.

This growth was reflected throughout the region with five from seven districts reaching new record median prices – Rodney District ($1.28 million), Manukau City ($1.157 million), Waitākere City ($1.12 million), Franklin District ($950,000) and Papakura District ($940,000).

House prices continue to defy gravity, although the Government has lobbed grenades, in the form of policy changes, at them.

The rises contrast with last year’s lockdown that generated a cautious contraction in prices, says Kiwibank chief economist Jarrod Kerr.

“The contrasting outcome seems to be explained by fewer days in lockdown over August, and the completely different climate in the market this time around.

“There was still significant interest in the housing market prior to lockdown. Also, the real estate industry and supporting services (conveyance, banking, etc) were better prepared to process transactions already in train during lockdown.”

Auckland fared better than any other region in August. It managed to avoid a double-digit fall in sales during the month – only -9.3% – and annual house price growth of 27.9% was the fastest pace of growth in almost six years.

Elsewhere, sales fell much faster, in the range of 15-30%. There were some eyewatering house price gains in places like Canterbury and the Hawke’s Bay.

Contrary to most regions, minor falls in house prices were recorded down south in Otago and Southland. Taranaki stood out by posting a 2% fall in its HPI in the month.

But again, the data will be thrown around for the next month or so, says Kerr. 

REINZ chief executive Jen Baird says house prices have once again risen across the country, with every region seeing a year-on-year increase from August last year.

“This latest lockdown has not dampened demand for, or confidence in, the housing market.

“We have heard from across the industry that prices achieved on sales completed in the early part of this lockdown continue to illustrate an ongoing excess of demand over supply; prices are still rising.

“The strength of the market saw the REINZ House Price Index reach a new high nationally.

“Nine of the 12 regions across New Zealand reached a record level in August, showing the underlying value of property is holding strong,” says Baird.

However, the total number of properties available for sale across the country dropped year-on-year by 31.9% in August to 12,249, down from 17,974 in August last year – 5,725 fewer properties.

This is a 3.4% drop from July and it is the lowest level of listings ever seen. It was not unexpected as the normal spring lift in listings has been delayed by the lockdown. 

Meanwhile, auction rooms may have gone quiet when alert level four was dropped on the country, but the latest data indicates this just meant a shift to online auctions.

Last month 26% of all properties sold by auction. This is the highest percentage of New Zealand homes sold by auction for an August month since records began.

Kerr says looking through the lockdown distortions – rising mortgage rates, further lending restrictions, affordability constraints, and a boom in new housing supply should all work to cool the market over the year ahead.