BNZ chief economist Tony Alexander says there's nothing in current Auckland housing figures to suggest that price rises will ease

History suggests the pace of Auckland house price rises will continue to increase, BNZ chief economist Tony Alexander says.

In his latest Weekly Overview, Alexander examined the latest monthly sales figures from Auckland's largest real estate firm Barfoot & Thompson.

He said the number of new listings received by B&T during the month was ahead 29.2% from a year earlier at 1636. The total last September was 1266, and in September 2011 1263. The total was the highest in fact for the month of September since 2,087 in September 2003.

"Does this mean buyers should start smiling their heads off? Not at all. Why?

"Back in September 2003 the 2087 new listings were well above the 1658 of September 2002, which were a strong 21.7% up from the 1362 of September 2001. Thus this year’s number of 1636 and rise of 29.2% looks like what happened in 2003.

"So did the market wonderfully calm down from 2003 and price rises fall away? Not at all," Alexander said.

In fact the average sale price come September 2003 was 18.5% ahead of September 2002. And that happened with the three month average ratio of sales to listings in September 2002 sitting at 22.9% rather than the far stronger and near record 38.2% we have now, he said. 

"I read nothing into the 29.2% rise in fresh listings compared with a year earlier to suggest to me that the pace of house price gains in Auckland is going to slow down from the latest reading of 12.5%. History suggests that instead, the pace will pick up."

In his latest overview Alexander looked at the situation in both Britain and Australia where the housing markets are starting to boom on the back of housing shortages and inability to quickly build more houses.

He drew the following conclusions for the New Zealand market:

1. We should be wary in our assumption that house construction will be able to surge in New Zealand because we will be easily able to source builders from the UK and Australia. We won’t be able to.

2. The GFC and evidence of some big house price falls in certain countries does not weigh heavy on the minds of investors in countries which did not experience a massive construction surge – the UK, Australia, and of course New Zealand.

3. Aussie investors are highly likely to increase their purchases in New Zealand as they seek better yields than those available in Sydney and Melbourne.

4. Just because you build up large retirement savings does not at all mean that you avoid a shortage of houses, high prices relative to world norms, or high investor willingness to gear into property.

On point four, Alexander said that Australia has all three and that is even with the capital gains tax "some in NZ think will make a strong contribution to shifting our investment preference away from property toward managed funds".

"It almost certainly will not," he said.

"The impact probably would be to push rents even higher. Kiwis are likely to continue to highly favour property as a long-term investment."

Alexander said that not only was history on their side of the property investors when it comes to good capital gains, "so too are interest rates now in a world where central banks want to speed up rather than slow down credit growth, rising migration flows, a physical shortage of NZ property, and awareness of that shortage".

He said he had also increasingly noticed that first aren’t just looking for a home to raise their family in.

"They, like so many other people already invested in property, want to be investors themselves. The desire is very strong by people to get their foot on the ladder rather than just secure their family home. The constituency of support for a capital gains tax on property investment may not be as great as some policy advocates are thinking."