House prices burning hot

The Palmerston North housing market is burning hotter than ever, a month after tax changes meant to cool property price rises were introduced.

At the end of March, the Labour Government took aim at property investors as part of a huge package of policies aimed at increasing housing affordability.

The bright-line test was doubled, meaning profits from selling a property within 10 years could be taxed at up to 39 per cent, and removing tax write-offs for interest on rental properties.

Despite some indications those measures had given some Manawatu¯ investors pause, QV Palmerston North property consultant Olivia Roberts said property prices in the region were still seeing remarkable growth.

QV’S House Price Index shows the average Palmerston North house price rose 30.8 per cent in a year to hit $687,537 in April – outstripping the 21.4 per cent annual change in the national average house price which now sat at $913,209.

‘‘Sales volumes have been low, and we continue to see buyer panic in the market as a direct result of lack of supply,’’ Roberts said.

At the current average rate of 10.9 per cent a month, Palmerston North’s average house price will be over $1 million by the end of August.

Real Estate Institute of New Zealand Manawatu¯ spokesman Andy Stewart said while it paid to keep in mind that sales did usually drop heading into winter, there were fewer investors buying property in the region.

Stewart said investors did seem to be stepping back to take stock in the wake of the Government’s new measures, while some landlords decided they’d had enough and sold up.

‘‘For example, we’ve been getting more investment properties come on to the market through our rental division.’’

Stewart said the increase in investment properties being sold in Manawatu¯ was enough to slightly bolster the critically low housing stock, but the effect on prices was still getting buried under the high demand.

For example, Palmerston North did have between 115 and 125 houses for sale at any one time, but that had bumped up into the 125 to 135 bracket.

‘‘That may possibly create opportunities for normal house buyers, but it’s a bit of a wait and see situation.’’

There were, however, faint signs the market could be heading for a turning point down the track.

‘‘Some buyers are getting a bit more cautious with their offers [as prices rise], so sellers might have to adjust to more realistic expectations.’’