Dunedin was the only place in the country to show any serious price weakness in July, while prices took an unexpectedly large jump in Queenstown-Lakes, according to the Real Estate Institute of NZ's House Price Index (HPI).
The HPI adjusts for changes in the composition of sales each month so is considered a better indicator of overall price movements than either median or average prices.
It shows that nationally, housing prices increased by 2.0% overall in July compared to June, are 1.4% higher than they were in April, and 9.4% higher than they were in July last year.
Price growth was slightly more subdued in the Auckland Region with the HPI up 1.6% in July compared to June, and 9.2% compared to 12 months earlier.
Within the Auckland region price growth was strongest in the central Auckland suburbs and weakest on the North Shore (see table below).
The area with the strongest price growth was Queenstown-Lakes, with the HPI for the district up a whopping 10.3% for the month, putting it ahead by 6.3%% for the year.
That was surprising given the area's reliance on tourism, however prices in the region can be volatile, so monthly figures should be treated with some caution.
Dunedin went against the national trend and recorded a 4.6% decline in the HPI for July compared to June which pushed it down by 6.4% compared to three months earlier, perhaps signalling that the city's recently strong, investor driven price growth may be coming to an end.
There was also a hint of flat or softer prices in the figures for Rotorua, Napier and Hastings.
However the strength of the overall figures caused Westpac's economists to revise their expectations for price movements for the rest of the year. Westpac Senior Economist Michael Gordon warned that the current strength in pricing might not last, but that prices were likely to fall less than had previously been expected.
"The surge in sales in July suggests a degree of pent up demand following the COVID-19 lockdown," he said.
"However it's just as true that there is pent up interest to sell.
"Listings have rebounded even faster than sales in the last two months and consequently the stock of unsold homes has risen since the lockdown ended.
"This is not a recipe for ongoing strength in house prices.
"We expect some renewed softness in prices by the end of the year.
"However it is now looking unlikely that the market will be as weak as our original 7% decline forecasts.
"We will be shifting our forecasts to a 2.5% decline between now and the end of the year," he said.
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REINZ House Price Index - July 2020
42 Comments
An important driver of the housing market is NZ’s stellar performance in managing the pandemic.
TTP
ORR’S Monetary policy is the main cause of driving NZ’s housing market and the economy.
https://www.cnbc.com/2020/08/14/new-zealand-considers-negative-interest…
Hi Ben,
In fact, they both contribute - working in tandem.
TTP
Total BS, No way has a interest rates dropped enough to allow first time buyers to purchase multi million dollar homes in Queenstown. Not to mention all the unemployment over there since our International Tourism has now collapsed due to the coronavirus. So how would residents there even get enough of a mortgage to afford a home? The money has to be coming from some where else considering such a sharp turnaround in the market.
Hi CJ099,
With all due respect, the above comments make clear that they are referring to the NZ housing market - not Queenstown is isolation.
But, at least you now appear to acknowledge that the housing market has become buoyant - despite pleading here, just a few months ago, that the market would drop considerably this winter.
Are you prepared to be accountable for what you have said here?
TTP
Bit hypocritical of you ttp. Your comment from only a few days ago being quite negative about the housing market (See below your comments). :P
by tothepoint | 5th Aug 20, 7:42am
We might not see another housing market boom for 12 months or longer......
TTP
Hi CJ099
I stand by my comment.
The housing market is pretty warm right now - so I believe we might not see another housing market boom for 12 months or longer.
However, the predictions that you made here 6 months ago have been shown to be patently wrong. Are you prepared to be accountable for them?
TTP
LOL That's fine ttp, you can stand by your comment that you're a hypocrite. Perfectly fine with me. :)
Agree, that and the misleading media which is pushing incautious buyers towards buying knowingly the market has no other direction than down in the next few months while savvy investors are offloading their investments now, this is the reason why we are seeing so many auctions and houses on sale, basically bi-directional fear of missing out.
Cash is now trash better buy something soon house classic car gold silver more stocks anything but leave it in the bank to see its value printed in half that is the problem now.
Your "stellar performance" is the reason for a lot of pain, homelessness and health issues specially across the poorest communities in our country. Obviously you don’t care about that. Shame on you.
Hi b21,
Please note that I'm neither Dr Ashleigh Bloomfield nor Mr Adrian Orr.
Shame on you making the accusations above!
TTP
The only shame is you TTP mocking people who can't avoid homes and supporting a centrally planned creating currency out of thin air regime.
Question if a truck driver with no assets has 100k in the bank and house price drop 70 percent. What happens to the value of his 100k? You know free market and all. People are struggling and hurting and you mock and show zero compassion.
Nobody is accusing you of anything other than a complete lack of empathy for those suffering, double shame on you!
I think everyone is aware Tim Mordaunt is not one of those.
Rather, people are pointing out a degree of self-absorption and lack of empathy.
Hi b21,
I come here to monitor markets closely and make well-considered predictions about the housing market. My forecasts have been shown to be pretty accurate compared with the forecasts of most other people who come here.
Saying I don't care about people who are disadvantaged is arrant nonsense. It's utterly shameful.
TTP
Your comments on this website, including this one show how much you care about "the markets" and how little you care about those surrounding you, if you would care as much as you claim you would show at least a bit of concern about those affected by high housing prices instead of just defending yourself by attacking what I said. Shame on those that are making this country a worse place to live in.
Hi TTP
Panademic is not yet over just like economy disaster so one should not jump the gun.
Fundamentals and asset prices are poles apart so one has to be extra careful and also the magnitute of policies adobted by reserve bank and government has never been explored before so not sure how it will unfold in future (short termed inflated the asset -stock and housing) but......
Not only in NZ but in many developed countries not just house price but even stock market is up with headline as below :
The stock market hasn’t seen a 100-day gain this strong since 1933
Economy fundamentals does not support rise in price of asset class so one has to be extra careful as is not the end of the story
Falling interest rate and printinting of money by itself is indicator of how bad the Ecenomy is and how worse it could go- hence extreme measures by reserve bank.
Rise in stock market and housing market is not in line with economy but only due to printing and distribution of free money by government world over so one has to be worried as can give away anytime. Need one catalyst and as not based on fundamental will give away so enjoy while it last.
Exactly, solution of low interest rate and QE adopted by reserve bank supported by government like antibiotic is good, if given in prescribed dosage or can be poison and do more harm than good.
No experts or reserve bank can guarantee, what the outcome will be or will it do more good (In short term) than harm (In long term) but as cannot sit idle have keep on trying with hope that it works or get sort out shortly but if it does not than all measures/antibiotic provided will do more harm than good.
If lockdown in NZ is over in next 12 days, may be damage will be less but if it extends than.......so wait and watch and control FOMO which is responsible for stock and house price and entry at this level can be......
You've got it in one.
Pent up demand to buy, pent up demand to sell.
Not a recipe for big price changes.
Yet.
'The area with the strongest price growth was Queenstown-Lakes, with the HPI for the district up a whopping 10.3% for the month, putting it ahead by 6.3%% for the year.'
House price jump in Queenstown, if due to ecenomy boom / strong ecenomy is Good and if not.... should be worried...
This might be a dumb question, but I'm hoping someone can clear it up for me - if the HPI in a region is up 10% on a year ago, is it reasonable to expect a particular house to sell for around 10% more than it did a year ago? (Or if the HPI is down 5%, is it reasonable to expect a house to sell for 5% less?) Or is that not how it works?
Yes I believe that is true, although there are many more informed on REINZ methodology (that is certainly not to say your question is in any way dumb) the REINZ HPI is similar to a line drawn from the lower left corner, extending towards the right hand corner indefinitely .Given New Zealand's unemployment rate has reduced this week according to statistics NZ methodology, it would appear that watching ,waiting and holding is never an option to delay or not consider purchasing New Zealand real estate.
The short answer is no - you need to understand how indexes are compiled
Does this simple explanation suffice?
Unfortunately no
A simple index comprising 5 components
50, 40, 30, 20, 10 index value = 30.0 = base index
60, 40, 30, 20, 10 index value = 32.0 = index increase = 6.6% = even though 1 house increased by 20%
50, 40, 30, 20, 12 index value = 30.4 = index increase = 0.4% = even though 1 house increased by 20%
However, if the 5 components all increased by 10% in the measurement period, then
55, 44, 33, 22, 11 index value = 33 = index increase = 10.0%
All depends on the distribution of sales - which end of the market the increases occur in
Right, obviously data is noisy - small sample sizes and outliers can muddy the water.
It's basic stats. Sample size and variance. Claiming house prices in QT have risen because of an index is nonsense.
Thanks Audaxes - I've read a bunch of explanations that are online and they all seem to say something different. But that one seems to be saying that the answer to my question is yes - is that correct on your view?
I am not a specialist index compiler - but it seemed an adequate explanation for a person seeking some understanding. It lacks utility if that purpose is not served.
What's also very weird is that QV was reporting that Queenstown was declining in its property prices only a very short while ago down -4.2% in the last three months to July. Not to mention that we're also in the middle of a pandemic which has wiped out or main international tourism industry, severely effecting holiday areas such as Queenstown.
Interest article August 5th: Quotable Value says average dwelling values still well up on a year ago but the growth rate is starting to tail off. Quote: "Values were mostly also weaker at the bottom of the South Island, with values in Queenstown-Lakes declining by -4.2% over the three months to July." https://www.interest.co.nz/property/106361/qv-says-average-dwelling-val…
So I guess banks are still extending ~60 % of their lending to one third of creditworthy households to speculate in the residential property market, while allocating an increasing amount to fund government deficit spending.
We start with the idea of credit creation, specifically a swap of IOUs between a bank and myself involving a bank loan that is my IOU and a bank deposit that is the bank’s IOU. Nothing could be simpler, and yet the mind rebels, especially the well-trained economist’s mind, because this simple operation increases my purchasing power without decreasing anyone else’s. It seems like alchemy, or anyway a violation of some deep conservation law. Real productive resources are the same as they were before, and the swap doesn’t change that, does it? Spending of the new purchasing power adds another layer of perplexity. If spending increases but real resources do not, then it seems logical that the increased spending must exhaust itself in higher prices—that is the intuitive appeal of the quantity theory of money. My purchasing power may increase, but everyone else’s decreases because their money balances buy less. From this point of view, the alchemy of banking seems like a kind of theft, something to be deplored in the name of economic science and if possible outlawed in the name of the geneneral good Link
.
All things considered I suggest this is against the run of play. Air BnB all but dead (domestic only), hospo desimation, and both that way for the foreseeable future. Can the tourist meccas survive on school holidays and xmas domestic traffic?
Impressive resilience to income generation.
If we figure out who on earth is buying in Queenstown then we will see under the hood of this market. That figure is just hard to fathom.
It's just city folk. Many, but not just, Aucklanders.
I know from a few reliable sources that something similar is happening in the Lake Tahoe area in California.
Something about the Covid situation has caused this. Probably a combination of much more working from home, and reduced travel options.
Australians including ex pat Kiwis like buying places in Central Otago without Australia's onerous investor stamp duties on purchase and absentee owner duties annually. Not sure what impact that has on the numbers buying.
The reality is that development land in Queenstown is held by a small number of people. Those people who sell now may not be able to afford to get into the market in 18 months time. The Largest stock of sections is held by RCl / Hanley farm and you can not on sell the land you have to build or the developer has first option to take it back. The developers are in no hurry. When the borders open in 2 years time it will be all on again. BUY or Build Now is the message for those who can get funding.
Prices will not fall til unemployment rises substantially.
Meanwhile, sales are not recovered. Wellington loss of sales in April and May was 764 compared to 2019
In June and July they had extra (compared to 2019) of 201. hence made up 23% of lockdown loss
In Auckland the lockdown loss from April and May was 1984. In June and July it has made up 843 of that, or 42%
This is easy enough to calculate but REINZ does not say it.
RE NZ listings have now stopped rising and per day new listings are static also.
The surge, if one might call it that, is over.
In Auckland the lockdown loss from April and May was 1984.
1984??? Don't you get Gerry Brownlee and the right-wing Facebook conspiracy theorists started!
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