The latest House Price Index (HPI) figures from the Real Estate Institute of New Zealand (REINZ) paint an uncertain picture of which way prices could be headed this winter.
The REINZ’s HPI is probably the best indicator we have of changes in the direction of house prices.
That’s because it takes into account changes in the mix of properties sold each month, unlike median or average prices, which can move up or down even when there is no movement in the underlying prices of individual properties.
And because the HPI is based on each month’s sales as they become unconditional, it reacts very quickly to price movements in the market compared to other measures based on quarterly data, which provide a good long term perspective on trends but respond more slowly to changes in market pricing.
Essentially what that means is if there’s a change in the direction of house prices, it should show up pretty quickly in the REINZ’s HPI.
The graph below shows the monthly percentage change in the HPI for the Auckland region, the rest of New Zealand excluding Auckland, and the entire country in each of the 12 months from June last year to May this year.
It shows prices were rising strongly between July and October last year, with the rate of growth easing back slightly from October to the end of last year, before rocketing up in February this year.
That was followed by a sharp decline in price growth in March and April, with the figures for Auckland dipping into negative territory in April, suggesting overall prices in the region actually declined in April.
That sharp decline suggested a significant cooling in the market over March and April and that view would have been cemented in place if the decline had continued in May.
The trouble is, it didn’t.
As the graph shows, the HPI ticked up again in May.
Not by much, but enough to break the downward trend of the previous two months.
That makes crystal ball gazing on the direction of houses over the next few months particularly difficult.
If the HPI had continued its downward trend in May then there would have almost certainly been a sense that the market was continuing to cool.
But whether May’s upward tick in prices is the start of another upward trend, or a blip in a continuing slide, or maybe just a levelling off after a period of rapid gains, we will have to wait and see.
What the figures do suggest is that the huge price gains we saw early this year have now abated.
However there has not been a crash and most properties should have held onto the price gains that accrued over the last year.
There may even be some more price growth left, but if there is, it’s likely to be at much more modest levels than in the past.
But these are unusual times and old certainties no longer apply.
More than ever we are reminded of the old saying: Past performance is no guarantee of future results.
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15 Comments
Housing market is managed by RBNZ and is no more running on fundamental.
50% jump in a year and that too from already inflated house price and still no emergency on part of people in power to act except lip service to distract.
If governor of RBNZ wants the housing market ponzi to continue, nothing can stop it, so not surprised.
News / Data keeps on indicating that housing market is still hot despite housing policy and LVR, yet if Orr does not want to believe as it does not suit his narrative, we can keep on discussing and debating but nothing will change as long as Mr Orr is heading RBNZ as ..........
The rate of increase of house prices appears to be slowing......
A soft-landing from the excesses of the last year is on the cards.
TTP
High priestess Bindi Norwell has moved on from REINZ to be CEO of a healthcare co-op. That will mean less media exposure in the future.
Very murky outlook is not for housing market Greg, it is for FHB.
Though all signs indicate rising house price, still as intent is not to act, Orr argues that may be in future, it may cool. If it is wait and watch only, why have data if it not intended to be taken in the right spirit and analysis is manipulated. On the other side, if their is a slight indication of house price growth stopping, panic button is pressed and action is taken overnight.
Just few months back official data presented was that house price rose by 23% and luckily PM witnessed an open home near her home and realized, how bad the situation is but now when the latest data suggest is 33%, is she still waiting for another open home near her OR going to press panic button.
Even your article suggests that housing market is still hot, yet giving benefit of doubt to current data (overlooking what data suggests) with assumption that may slow in future.
When was up 23% had same assumption and now when is up 33% have same assumption, after few months when it will be up 43% will still have same assumption....is their no accountability.
Greg your thoughts on this assumption business.
You are right, sir.
Been attending a few auction rooms, for the last one week. From what I observe, all these talk of what restrictions are coming is only spurring more interest in quick buying now itself, driving prices high. 40% over CV for 2/3 bedroom houses in distant suburbs is becoming the norm. The heat is increasing for mid range properties. Which is hitting FHBs more than investors surely.
Top end is a different beast, not affected by these rule changes. It solely thrives on availability of loan approvals for high income earners or rich people (may be from overseas) with loads of cash.
Both Treasury and RBNZ can do zilch to move the market to the direction they want.
They can only screw it up further by their dilly dallying and back and forth with different policy ideas.
Even the cry wolf about inflation and interest rates increase is driving the frenzy to close deals now.
Good luck, FHB.
the part of growth due to low interest rate will be gone.
the part of growth due to ppl growth, urban land limits, lack of housing, high cost of labour and building material will encourage further growth.
so go figure.
Reminds me. It's not the price of houses going up, it's the value of NZD falling.
Especially with houses, there's a narrative for every occasion.
In that case, we should sell our houses and buy USD ones... currency appreciation
We can rely on Government and Reserve Bank to continue to support house price appreciation because it has been the engine of middle class wealth. Consequently it's clear we will never go back to the pre-pandemic policy settings because that would put downwards pressure on prices.
Everyone is still just talking so prices will keep rising. Its going to take until Christmas to see if the gains have still been huge or what people expect to be "Normal" from then on.
It's sure looks murky for those who're under the water; for those above it, it is as bright as day.
Be quick, opportunity don't last long, misguided uncertainty is your friend.
If its below 10% from March 2021 till March 2022 I'll eat my hat. I'm confident I won't be eating my hat. I would even say 15% but ill stay Conservative
I expect spring will be strong and more so when the borders finally open up again.
Yep for those with their heads above water its crystal clear which way the market is going, you can bet your house on it.
With those with vested interest the market always looks like it's going up. I have seen this somewhere else... bitcoin rings a bell?
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