Housing market continued cooling in November

House price inflation abated further in November, although sales volumes increased slightly, and the Auckland market cooled a little more.

The latest Real Estate Institute of New Zealand’s house price index rose 3.5 percent from a year earlier, down from the 3.8 percent increase recorded in October.

The number of houses sold in the latest month rose 2.6 percent to 7,286 compared with November last year.

In Auckland, November prices were down 0.6 percent from a year earlier, having eased 0.4 percent in October. Volume picked up by 3.9 percent.

“November was a disappointing month for housing activity across much of the country,” said Kiwibank economist Jeremy Couchman, adding that sales volumes were down 9 percent month-on-month in seasonally adjusted terms.

“The housing market continues to run with recent trends – that is, Auckland house prices aren’t up to much and prices in much of the rest of the country continue to outpace their northern neighbour as they play catch up,” Couchman said.

“There are even pockets of buoyant housing markets such as Whanganui, the Manawatu and the Hawke's Bay.”

The house price index for Whanganui/Manawatu reached a record in November. Prices there are up 16.4 percent on a year ago while prices in Gisborne and Hawke's Bay also set a new record and are up 12.4 percent.

However, nationally, house price inflation has been tracking between 3.5 percent and 4 percent for more than two years now and is likely to continue, Couchman said.

“Current developments are consistent with our view that the housing market has entered a period of consolidation, meaning national house price appreciation is expected to move broadly sideways for the next year or so.”

Couchman said “a decent jump” in sales in October was reversed in November and he said what was probably at play was foreign buyers rushing to get in before the ban came into force on Oct. 22.

“In Otago, the bolthole of choice for foreign tech entrepreneurs, sales did jump 17 percent in October month-on-month and fell 8 percent in seasonally adjusted terms in November.”

Nevertheless, prices in Otago reached a fresh record in November, the index for the region up 11.6 percent from a year earlier.

The number of days it takes to sell a house continues to creep higher, increasing by two days to 35 in November.

Auctions were used to sell 15.3 percent of houses sold in November, down a touch from 15.8 percent in October.

The house price index was developed by the Reserve Bank to smooth out greater or fewer numbers of cheap or expensive houses being sold in any month and to take into account the size of houses being sold to reach like-for-like numbers.

But REINZ continues to headline its own median house price, which rose 6.5 percent in November from the same month last year, up a little from the 6 percent increase in October.

The discrepancy between the median price and the index’s 3.5 percent annual increase is explained by the fact that the number of homes sold for less than $500,000 fell from 44.5 percent in November last year to 39.6 percent this November, the first time this figure has fallen below the 40 percent mark.

On the other hand, the number of homes sold for prices between $500,000 and $750,000 rose from 27.6 percent to 30.2 percent.

However, properties sold for more than $1 million eased to 14.7 percent this November from 14.9 percent last November.

Despite the evidence of a housing market that continues to cool, institute chief executive Bindi Norwell said median prices rose in 14 out of 16 regions and seven of those regions recorded double-digit increases, “showing the strength of the market.”

She also said that “record median prices will be a great early Christmas present for vendors” but that they will “make hard reading for those first-time buyers who are desperately saving to get onto the property market.”

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