House prices up despite LVR rules

WELLINGTON: Home buyers appear to have shrugged off the arrival of new loan to value ratio (LVR) rules as house prices soared again in March.

Median house prices for residential property across New Zealand reached a record $826,300 in March this year.

This figure from the latest monthly Real Estate Institute of New Zealand (REINZ) report was up 24.3% from $665,000 during the same month last year.

The figures are based on sales recorded before the Government’s latest package of housing policy instruments took effect.

Earlier this month, the Government announced the removal of tax deductibility of interest on loans for residential property investment and extended the brightline test to ten years.

However, the first tranche of the LVR restrictions came back into effect on March 1, investors now requiring a 30% deposit and owneroccupiers requiring a 20% deposit.

‘‘March’s result is much higher than many commentators would have expected,’’ REINZ acting chief executive Wendy Alexander said.

‘‘We would have expected sales volumes to slow a little as buyers took this [LVRs] into account, however, it might just be that we need a few more months for this to really start to take effect.’’

Looking ahead, she said that she expected prices to continue increasing this year.

‘‘We would expect house prices to continue rising, but we hope this will be at a slower pace than we’ve seen over the last 6 to 12 months,’’ Ms Alexander said.

‘‘Hopefully, the reimplementation of the LVRs, changes in government policy and the move towards winter will slow the rate of growth down a little, but only time will tell what effect they will have.’’

Auckland’s median house price increased by 18.5% from $945,000 in March 2020 to $1,120,000 in March — a record for the city.

At the top end of the market, the percentage of properties sold for $1 million or more increased from 20% (1485 properties) in March last year to 34.8% (3386 properties) this March — the highest percentage of $1 millionplus properties yet sold.

The news was not good for those looking for a home on the opposite end of the market.

The number of homes sold for less than $500,000 across New Zealand fell from 27.9% of the market (2065 properties) in March last year to 15.3% of the market (1489 properties) in March this year — the lowest percentage of properties sold in the sub$500,000 bracket.

There was a massive demand for homes throughout March.

The number of residential properties sold in March across New Zealand increased by 31.2% compared with corresponding time last year (from 7408 to 9721) — the highest for the month of March in 14 years and the highest annual percentage change in three months.

Median house prices for New Zealand excluding Auckland increased by 23.6%, from $550,000 in March last year to $680,000, a record for the country.

In addition to Auckland, 11 other regions reached record median prices, including Otago with a 30.8% increase from $535,000 in March last year to $700,000 in March this year.

The Central Otago district ($770,000), the Clutha district ($400,000), Dunedin city ($650,000) and the QueenstownLakes district ($1,185,000) all reached record median highs.