New Zealand's housing market soars, with record prices for second month in a row

New Zealand’s housing bubble shows no sign of bursting, with record prices recorded for the second month in a row.

The property research firm CoreLogic’s house price index shows that the average house price hit $788,967 in December, reflecting an increase of 2.6%. Growth for the final quarter of 2020 was 6.1% – the highest recorded since the 6.6% in the three months to February 2004.

Nick Goodall, head of research at CoreLogic, singled out the 10% growth in Tauranga, Whanganui, Porirua, Gisborne and Palmerston North over the quarter as “extraordinary”. In Masterton the market was even hotter, with average prices increasing by 17.4%.

Property values in Gisborne, meanwhile, have increased by more than 30% since the start of the year, surpassing the half-million dollar mark at the end of December ($514,212).

It caps off an exuberant year for New Zealand’s property market and signals a record summer ahead, influenced by record-low mortgage rates, robust consumer sentiment and demand outweighing supply.

Though the Reserve Bank of New Zealand will reinstate loan-to-value ratios in March, it is not expected to have much impact on the growth, with Goodall forecasting a record summer for prices.

At a time of global uncertainty, he wrote, “It is clear that New Zealanders are looking towards property as a safe investment and the most attractive asset for wealth accumulation”.

It means the inaccessibility of housing for first-time or low-income buyers – as well as protections for renters – is shaping up to be a key concern for Jacinda Ardern’s government.

A Renters United spokesperson, Ashok Jacob told Radio New Zealand’s Morning Report programme that the lack of housing supply was a national crisis, squeezing the rental market and increasing the disparity between “people who have a lot of capital and people who are just trying to make ends meet”.

Jacob said house prices could no longer regarded as an urban issue, with the bubble that has long put Auckland property out of reach now extending to the rest of the country.

Analysis by the property data company Valocity shows that central Auckland was the only part of the city where median property values did not exceed $500,000. Wider Auckland’s median property value is now $1.21m.

Adam Gurr, a real estate agent, told the property site OneRoof that growth in the apartment market had been temporarily suppressed by the absence of international visitors and students in the inner-city through the pandemic.

He expected that to grow by as much as 10% in the coming year, as expat New Zealanders used to living in central apartments overseas sought to return. Already such inquiries were making up 20% of his current interest, Gurr said.

It signals the shift in the long-imagined “New Zealand dream” of a standalone home on a quarter-hectare section, not yet reflected by the market.

An Infometrics senior economist, Brad Olsen, told Radio New Zealand that relatively low growth in Christchurch – where more houses were built after the 2011 earthquake – showed how increasing supply could help to stabilise prices.

“Radical change” was needed to bring the housing crisis under control, Olsen said, adding that Ardern’s government would be under increasing pressure to deliver it.

source: theguardian.com

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