Record house price rise for second month in row

WELLINGTON: House prices grew at a record rate for the second month in a row.

Property research firm Core Logic’s house price index rose 2.6% in December, the average house price hitting $788,967.

The index was up more than 11.1% on a year ago.

Tauranga posted the steepest rise in property values of all the main centres, up 6.8% over December to $876,122.

In Dunedin the average house price hit $582,269, up 1.9%.

Auckland remains the most expensive area, where the average house price is now $1,142,700, while houses in the Buller District remain the cheapest with an average price of $227,233.

Core Logic head of research Nick Goodall said it was being driven by low interest rates, attractive capital gains and tight supply, which were unlikely to ease in the near term.

‘‘It is clear that New Zealanders are looking towards property as a safe investment and the most attractive asset for wealth accumulation.’’

He said consistent messages from both the Government and the Reserve Bank to protect that wealth had reduced the risk associated with property investment, which led to greater demand and higher values.

‘‘Later in 2021 the potential flowon impact of such strong growth will eventually be outright unaffordability, reducing the pool of buyers able to borrow enough to participate in the market.’’

Mr Goodall expected this would result in greater political pressure on the Government to curb demand.

Loantovalue ratios will be reinstated by the Reserve Bank in March but its ability to take the heat out of the market would be limited, he said.

‘‘We may see the restrictions tightened further, potentially requiring property investors to have a 40% deposit.’’ — RNZ