House prices extend gains, stoke talks of early rate rises

Wednesday 14th October 2009

New Zealand house prices extended their gains in September, recovering to levels last seen in 2007, as confidence seeps back into the housing market.

The national median house price rose to $350,000 last month, from $346,750 in August, according to the Real Estate Institute. Prices have gained from $330,000 in September 2008. There were 6,464 sales in September, up more than 30% from the same month last year.

The revival in house prices may stoke speculation Reserve Bank Governor Alan Bollard will raise interest rates sooner than his official target of the second half of 2010 after he warned against a resumption of debt-funded property investment. Bollard has said New Zealand’s economy is unbalanced, with too much emphasis on non-productive sectors such as property and not enough on exports.

“Today's data is supportive of our view that the RBNZ is going to be forced to renege on its expectation that it will retain the OCR at 2.5% or lower until the latter part of 2010,” said Darren Gibbs, chief economist at Deutsche Bank.

While the housing recovery is only contributing to a modest recovery in generalized domestic demand, “we will be watching for signs of stronger pass-through into the economy over coming months,“ Gibbs said.

Deutsche Bank expects Bollard will raise rates in June next year, if not in April.

The new REINZ house price index, developed with the RBNZ, rose 1.9% in the latest month and was up 5.3% in the year.The number of days to sell a house fell to 33 from 34 in August and is down from 52 in September last year, the REINZ report showed.

The distribution of sales showed a pick-up in upper price brackets, with sales of properties of $1 million or more jumping to 216 from just 94 in September 2008.

Sales of houses under $400,000 rose to 3,897 from 2,968 a year earlier.

Looking at the regions, there were 139 houses sold in Northland, down from 126 in August, and the median house price fell to $285,000 from $295,000. The median house price in Auckland climbed to $455,000 from $450,000 in month earlier, with sales rising to 2,355 from 2,067 in August.

The median price in Waikato/Bay of Plenty/Gisborne fell to $315,000 from $317,000 with sales of 898 houses, up from 796. In Hawkes Bay, sales rose to 235 from 213 and the median price gained to $265,000 from $253,000.

Manawatu/Wanganui recorded a gain in median price to $225,250 from $210,000, with sales falling to 286 from 298. Taranaki’s median price fell to $283,000 from $287,500 with sales picking up to 183 from 150.

In Wellington, the median price fell to $378,168 from $395,500 with 701 sales versus 622 in August. Nelson/Marlborough had 224 sales, up from 213 with the median price rising to $337,125 from $325,000.

In Canterbury/Westland, the median price rose to $311,500 from $295,000, with the volume of sales rising to 921 from 885.Central Otago Lakes had 103 sales, up from 87, with the median price sinking to $405,000 from $435,000.

In Otago, there were 275 houses sold in September, unchanged from August. Southland had 144 sales, little changed from 146 in August. The median price fell to $189,500 from $200,000.

Businesswire.co.nz

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