Housing Market Turning

Article by Miriam Bell for www.landlords.co.nz

The bank’s latest Home Truths report is out and it states there’s now no doubt the housing market has turned, with price inflation already at 5.6% and a lift in sales.

According to the most recent REINZ House Price Index (HPI), over the four months from July to November New Zealand house prices rose 4.8%, compared to 1.6% over the entire preceding year.  The REINZ data also shows that the average number of days to sell a house has fallen sharply, as has the stock of properties available for sale.

However, ASB has recently changed its tune – in its latest Home Economics report, it states the housing market upturn is gathering stream and the Auckland market has awakened.

ASB senior economist Mike Jones says they had expected price growth of 5-6% next year, but they now expect to see 6.5% nationally.  “We shaded up the speed of the near-term lift in house prices (particularly in Auckland) and, with housing fundamentals still solid, also extended slightly the expected duration of the cycle.”  That has left them expecting year-on-year price growth of 7.6% in Wellington, 5.5% in Auckland, 3.8% in Christchurch and 7.7% in other regions in 2020.  Jones says that, despite this, the key tenets of their broader housing view remain unchanged.  “We still don’t think we’re headed into ‘boom’ territory, thanks to the restraining effects of various housing policies and the supply response underway.  The house price inflation cycle is expected to top out in the high single digits late next year on the back of rising supply and a slow grind higher in mortgage rates.”  He too doubts mortgage rates will continue to fall from here, even if the Reserve Bank delivers one more cut next year, as is their view.  “Our forecasts have mortgage rates (slowly) trending higher in 2020. This supports our view that the housing market upturn will start to run out of steam towards the end of next year.”