Residential market remains buoyant
THE HOUSING market is likely to remain firm and in sellers’ favour, with one economist predicting a three-year upturn.
“The shift in the New Zealand real estate market in favour of sellers happened in May and has largely strengthened since then,” BNZ chief economist Tony Alexander says.
“With New Zealand interest rates set to remain low for quite some time, the residential real estate market is likely to remain in favour of sellers for an extended period.”
He was commenting on the latest residential market survey undertaken by the BNZ and the Real Estate Institute of New Zealand, which found buyers typically were more motivated than vendors.
The survey results were published within a day of the REINZ reporting 6035 dwellings had sold in August.
“That was a 16 per cent rise from a year earlier, which takes the annual total to 70,065,” Mr Alexander says.
“That represents a 22 per cent rise from sales in the year to August 2011 and is the highest annual sales total since April 2008.”
He predicts a cyclical upturn for the next three years.
“A shortage exists, people are aware of it, young buyers are scrambling to get on the ladder, investors have pricked up their ears and opened their wallets and banks have sensed the rise in demand and are eager to lend. Construction is rising but we’re going to run out of builders. Costs are rising and will rise further, people don’t want vast swathes of new land opened up for housing, and all of this when net migration flows have been negative.
“Imagine what will happen when we get back to net gains over 10,000 per annum.”
Mr Alexander points out much of the Auckland construction is being Chinesefinanced.
“They are taking care of business, which traditional financiers in New Zealand are to a great extent refraining from still.
“China, including Hong Kong, has now become our largest single source of net migration inflow ahead of the UK, then India.
“A recent survey in China shows that of the estimated 500,000 people with financial assets over the equivalent of US$1.5 million, 27 per cent have already established houses overseas and another 47 per cent are considering it.
“Not only that, I am coming across an increasing number of articles noting rising demand for land for agricultural purposes, as well as traditional bolt-holes from one’s domestic woes.”
The BNZ-REINZ’s September survey of licensed real estate agents found 41 per cent felt prices were rising, and believed both investors and first-home buyers to be quite active.
Open home attendance was up, more written sales went unconditional and auction clearance rates were strong.
A quarter of agents reported more people asking for appraisals.
“This is a rise from just two per cent in August and will bear watching to see if more stock may be coming forward,” Mr Alexander says.
“The chances are that this is not happening, however, as earlier this year and late last year very high proportions of agents said more appraisals were being sought – yet no listings surge eventuated.”
Prices were widely perceived to be continuing to rise.
“The relatively smooth upward trend in this measure speaks to the strength of the turnaround in pricing behaviour,” Mr Alexander says.
A shortage of listings was “overwhelmingly” the main factor, causing buyers to hold back or which frustrated their efforts to buy.
“Few buyers are holding off because they feel prices will fall,” Mr Alexander says.
Meanwhile, the REINZ says August’s lift in prices signals a “modest revival” in the housing market, but isn’t expecting an upsurge in listings for spring.
“House buyers in Auckland are increasingly driving the New Zealand real estate market, with a widening gap opening up between the dynamics of the Auckland market and the rest of the country,” REINZ chief executive Helen O’Sullivan says.
“While both Auckland and Christchurch saw new record median prices during the month, it is the strong sales volume growth in Auckland that is most notable.
“Normally at this time of year we see a dip in sales volumes; this year, apart from the weather, winter was cancelled in Auckland.
“Across the rest of the country while we are continuing to see rising sales volumes, prices continue to reflect the general caution around the economic outlook.
“In many parts of the country we are also seeing shortages of houses available for sale, often a market feature at the end of winter, although expectations for a rush of listings in the spring are not strong.”
This is particularly so in Wellington.
“An increasing shortage of listings is becoming apparent across the region, with uncertainty in the public service sector making owners cautious about listing their properties,” Ms O’Sullivan says.
“Buyer interest is still evident and clearance rates are solid.”
The median price for the Wellington region increased by $19,000, or 5.2 per cent, compared to both July and August 2011.
Prices for both periods increased most in Upper Hutt, southern Wellington, western Wellington and the Wairarapa, with only central Wellington experiencing a fall.