Median house sale price up 0.9% in September as sales rise 10% from August (Update 4)

The first month of the 'spring selling season' saw the national median house sale price rise 0.9% in September from August, while sales rose 10%, figures released by the Real Estate Institute of New Zealand (REINZ) show. (Update 4 includes ASB economist Jane Turner noting seasonally adjusted sales rose 2.9% over the month, also comments on RBNZ implications.) The national median sale price was NZ$350,000 in September, just below its peak of NZ$352,000 in November 2007. There were 6,464 sales over the month, up from 5,878 in August and 4,499 in September 2008. See all of our real estate charts here. Newly appointed REINZ President Peter McDonald said the figures "indicate improved confidence of buyers and sellers in the marketplace". "We're seeing a slow, but steady, appreciation in sale values and we're now back to the prices being fetched in the corresponding period in 2007 when the median was NZ$351,500," he said. There were 5,894 sales in September 2007.

House prices in September were up in all but three out of 12 districts compared with 12 months ago. Northland was down 4.20% from a median of $297,500 to $285,000, and Hawkes Bay fell 2.48% from $271,742 to $265,000. Central Otago Lakes was down 15.62% from $480,000 to $405,000. The biggest rises were in Auckland, climbing 8.33% from a median of $420,000 to $455,000; Taranaki which rose from $256,583 to $283,000 (up 10.29%); and Wellington, up 8.04% from $350,000 to $378,168. Number of days to sell was the third factor contributing to what the real estate industry is describing as a very encouraging month, Mr McDonald says. Nationally, properties took a median of 33 days to sell compared with 34 in August and 52 in September 2008. "Again for days to sell we're back to 2007 figures which was a comparable 32 days,"

The REINZ's new Housing Price Index, created with help from the Reserve Bank of New Zealand, increased 1.9% in the September month, while prices in the three months to September were up 2.5% from the three months to August. The index rose 5.3% from a year ago, and shows house prices in September were down 4.4% from their November 2007 peak, the REINZ said. ASB economist Jane Turner said sales rose by a seasonally adjusted 2.9% in September from August "largely as expected given the steady pace of mortgage approvals and agent listing data." "Housing demand continues to be underpinned by the lift in net migration and low interest rates," Turner said.

The RBNZ is likely to be uncomfortable with the current degree of tightness in the housing market. While agent data suggests new listings are increasing, it has not been enough to meet demand resulting in house prices continuing to be bid up. The very low number of days to sell suggests more house price inflation pressure is likely over the next few months. However, a strong housing market and rising house prices are likely to attract new listings and encourage new building, and we expect the supply and demand imbalance will soon correct. However, in the meantime house price inflation has been slightly stronger than we had been expecting. The RBNZ has voiced concerns around the sustainability of a housing-led recovery. The current heat in the housing market is taking some time to cool, with supply sluggish to respond. On its own, the current housing market may see the RBNZ favour increasing the OCR sooner rather than later. Although this needs to be traded off with the current fragility of the economic outlook and the high NZ dollar undermining export competitiveness. While we do not expect the RBNZ to increase the OCR until June 2010, we see the risks skewed to an earlier start.

We will provide further updates.