Where’s the house price slide?

"Prices are still holding, which is interesting." Bindi Norwell, REINZ

Conditions are right for a property price drop, but so far values are holding stubbornly firm.

Usually, for prices to stall, you need a change in the supply and demand equation. That means fewer buyers or more properties to choose from, lessening competition.

The latest Real Estate Institute figures show that scenario is playing out, in Auckland in particular.

The number of sales in May was down 27.5 per cent in Auckland compared to the year before, and 13.6 per cent across the rest of the country.

And homeowners are still putting their properties on the market. Auckland recorded an almost 50 per cent increase in properties for sale in May compared to 2016.

Chief executive Bindi Norwell said the drop in sales volumes and higher inventory, as well as a drop in auction sales, might usually create an expectation that prices would soften.

‘‘Prices are still holding, which is interesting.’’

Westpac acting chief economist Michael Gordon said the fact Auckland’s market was slowing at all might seem strange given the housing shortage in the city.

But he said much of the rise in Auckland property prices in recent years was driven by the land component.

It is a different story in other parts of the country, where there are still fewer properties available for sale than there were last year and some markets are recording double-digit percentage price growth.

Norwell pointed to Northland, Manawatu and Nelson, which have all had year-on-year price growth of more than 20 per cent. Northland is near 30 per cent and has hit another record median price.

Regional areas that were more affordable and attractive for people moving to New Zealand, or deciding to stay in the country, could expect strong growth to continue, she said.

The national median house price increased 6.7 per cent to $540,000, or $430,000 excluding Auckland.

The Real Estate Institute’s house price index indicates activity nationwide is up 5 per cent on an annual basis. In Auckland it is up 1.8 per cent, and outside Auckland up 11.1 per cent. But compared to April, it is down 0.4 per cent nationwide, down 0.7 per cent in Auckland and up 0.2 per cent for New Zealand excluding Auckland.

The median days to sell nationally increased by five to 37 days, compared to 32 days in May 2016.

Regionally, Hawke’s Bay had the shortest median days to sell at 30 days followed by Wellington and Nelson/marlborough at 31 days.

Mieke Welvaert, of Infometrics, said the decline in sales in May was more widespread than expected.

The only areas that recorded an increase, year-on-year, in sales were Tasman, Nelson and the West Coast. Together they accounted for just 3 per cent of total sales.

She said the slowdown as a result of the introduction of a new loan-to-value restriction (LVR) for investors had been bigger than previous rule changes, partly because interest rates had moved up at the same time.

Welvaert expected sales to pick up again and prices to continue to rise as population growth put pressure on.